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As possibly the country's most famous octogenarian, Bruce Forsyth will have been drawing his State Pension for 16 years. Now I like Brucie, and doddery he is certainly not, but, as Tony Luckett pointed out in his recent article, I'm not sure I want to be paying Bruce's pension with my hard-earned wages, snatched away from me as compulsory National Insurance contributions.

But wait, state pension problems aside, surely my NI contributions give me something for my money. Don't they?

Well yes and no.

State Pension

As discussed, paying NI contributions entitles everyone to draw a basic State Pension (at an as-yet undetermined considerably older age) provided you have made contributions for a minimum number of years. If you are not due to retire until after 6 April 2010, this is 30 qualifying years.

A qualifying contribution year is one in which you have paid at least a minimum amount of NI contribution -- how much more than this minimum you have paid does not affect your basic state pension, although it may affect any additional pension entitlement (see below).

If you do not have the full 30 years' contributions, you will earn 1/30 for every year of contribution. If you want to 'top up' your contribution record to earn the full 30 years, you can make voluntary Class 3 NI contributions, although given the meagre amount of the State Pension, even in today's terms, you may consider it wiser to invest your £12.05 per week elsewhere.

Note (Stockholm: NOTE.ST - news) that the named recipient of child benefit (normally, but not necessarily the mother), and certain carers can reduce the number of years required by up to ten years. For those reaching retirement age after 6 April 2010, this automatically applies when receiving child benefit for a child under 12, although those in other circumstances may need to make a claim.

The additional State Pension

There are actually two different additional State pensions, the old SERPS scheme and the new State Second Pension (S2P).

The SERPS scheme ran until April 2002 and gave you an additional percentage added on to your State Pension, depending on the amount of your national insurance contributions. On this basis, higher earners (and therefore higher contributors) would have been entitled to more additional pension.

However, whilst being logical, this method of determining additional entitlement was not deemed fair, and in 2002 the S2P Pension was introduced.

The exact methods of calculation of SERPS or S2P entitlement have not been disclosed, but the S2P is intended to provide "a more generous additional State Pension to low and moderate earners, and certain carers and people with a long-term illness or disability".

Whilst admirable in its aims, the big disadvantage of this is that higher earners no longer have any incentive to remain in the S2P scheme, as they are highly likely to receive far less from the scheme than they have contributed, and these people are therefore more likely to contract-out of the scheme and have their contributions paid into a personal pension scheme instead. At which point, the whole methodology falls down.

SERPS contributions made before 6 April 2002 will remain frozen in time, just waiting for you to retire, but any contributions made after this date will automatically have been paid into S2P.

Again, those with small children (under six years old here) and carers may receive credit for contributions into S2P when not working due to home responsibilities.

So assuming you have the requisite number of qualifying years, and you have, or have not, decided to contribute into the S2P for the greater good, is there any point in paying NI any more? Not that you have a choice (unless making voluntary contributions of course) you understand.

NI funded benefits

There are a number of state benefits that require a minimum level of NI contribution in order to receive the benefit. Some, like Jobseekers Allowance also have a minimum income criterion such that those who have never worked, and have therefore never paid NI, can still claim some benefit.

Other benefits that depend on NI contributions include:

• contribution-based Jobseeker's Allowance (Class 1 NICs only)
• Incapacity Benefit (if you can't work for long periods due to illness or injury)
• contribution-based Employment and Support Allowance (ESA)
• Widowed Parents' Allowance
• Bereavement Allowance
• Bereavement Payment

The future of NI

In recent years there have been a changes to bring the NI limits in line with income tax bands. This could be a precursor for a major shake up of the whole system, or a subtle way of grabbing a few extra pennies.

There's no doubt a major rework of the NI system is both overdue and highly desirable.