NIM25041 - Class 3 NICs: deficiency notices: background

Purpose

Prior to 2013 the National Insurance and PAYE Service (NPS) automatically sent out letters known as ‘Deficiency Notices’ (DN) to anyone who was at least 35 years old and had less than 30 qualifying years for basic State Pension (bSP).

The DN told the person that a specific tax year was ‘not qualifying’ for benefit purposes and gave them the opportunity to pay Class 3 NICs voluntarily or query the details held on their National Insurance (NI) record.

History

Years up to 1995-96

Prior to 1998 approximately 15 months after the end of each tax year, NPS performed a scan to identify anyone who had not paid, or been credited with, enough contributions to make that year count towards their bSP.

HMRC then sent DNs to those people inviting them to consider paying Class 3 NICs on a voluntary basis to make up the shortfall. The DN also showed the actual amounts paid and/or credited. This enabled people to check that all contributions paid and/or credited had been recorded. The annual exercise was suspended in 1998 with the last of the “old” DNs being issued in 1997 for the 1995-96 tax year.

1996-97 to 2001-02

In 2003 the Inland Revenue performed a “catch up” exercise issuing DNs for the 1996-97 to 2001-02 tax years. This gave contributors the opportunity to pay Class 3 NICs for these years. Because of the delay in issuing DNs, the normal provisions for time limits and higher rates do not apply to the payment of Class 3 NICs for the 1996-97 to 2001-02 years. The special provisions for these years are shown at NIM25042.

2002-03 to 2012-13

The annual DN exercise was re-instated from 2002-03 until 2012-13.

Due to the changes introduced by The Pensions Act 2014 HMRC did not issue DNs to any contributors from 2014 onwards. Those customers retiring before 6 April 2016 were contacted by DWP four months before their State Pension age and were given the opportunity to pay Class 3 NICs voluntarily.

New Process

In December 2015, what is now the Personal Tax Account was introduced and the digital Check your National Insurance record provides a person with details of their qualifying and deficient tax years.

Anyone can request a statement of their NI record from HMRC or go to GOV.UK to check their State Pension.