Voluntary NI contributions

[Slean Wolfhead]

Has anybody got experience of making voluntary Class 2 or Class 3 NI contributions to make up gaps up to the 30 year requirement for state pension benefits?

 

As I read the HMRC website, I can make up to 6 years of backdated Class 2 contributions at around £2.90 ish per week because I was previously "ordinarily" employed in the UK up to the date I emigrated. Can anybody confirm what "ordinarily" means? A full time job with an employer for more than three years prior to emigrating and full Class 1 contributions made to the date I left?

 

The other alternative is Class 3 contributions at around £15 ish a week, but these are obviously more expensive and give less benefits, in the unlikely even i had to return to the UK.

 

I just see people on here talking about the more expensive and less beneficial Class 3 contributions and wonder why you can't make Class 2 contributions instead?

[Guest GarySawers]

Just want to keep updated with this thread!

[le petit roi]

Has anybody got experience of making voluntary Class 2 or Class 3 NI contributions to make up gaps up to the 30 year requirement for state pension benefits?

 

As I read the HMRC website, I can make up to 6 years of backdated Class 2 contributions at around £2.90 ish per week because I was previously "ordinarily" employed in the UK up to the date I emigrated. Can anybody confirm what "ordinarily" means? A full time job with an employer for more than three years prior to emigrating and full Class 1 contributions made to the date I left?

 

The other alternative is Class 3 contributions at around £15 ish a week, but these are obviously more expensive and give less benefits, in the unlikely even i had to return to the UK.

 

I just see people on here talking about the more expensive and less beneficial Class 3 contributions and wonder why you can't make Class 2 contributions instead?

Refer to my post in this thread. Bear in mind it was May 2012 and things may have moved on.

 

http://www.pomsinoz.com/forum/money-finance/207687-voluntary-ni-contributions.html#post1936475318

 

Perhaps best to contact them and ask the question on what category you fall into. You may have to take financial advice as to whether you will actually benefit from paying the additional contributions.

 

I received info from them a few months ago for this years payment...I'll try and dig out the contact address in that letter and post it in the next day or two if you would like.

[Andrew from Vista Financial]

There isn't a defined period of time for the previously ordinarily employed prior to leaving the UK definition as far as I am aware.

 

There is also a definition to be met by having to be working in Australia to be able to qualify to pay Class 2 contributions.

 

You are required to apply in any event if you wish to be accepted to pay Class 2 which is probably the steps you should take if unsure in the first instance.

 

Regards

 

Andy

[winter1]

There isn't a defined period of time for the previously ordinarily employed prior to leaving the UK definition as far as I am aware.

 

There is also a definition to be met by having to be working in Australia to be able to qualify to pay Class 2 contributions.

 

You are required to apply in any event if you wish to be accepted to pay Class 2 which is probably the steps you should take if unsure in the first instance.

 

Regards

 

Andy

 

I think the rules say you have to have 11 years of contributions in the UK previously but this may have changed.

 

I paid several years and to get the cheaper class 2 rate you have to be employed by an Australian employer in a permanent role, not self employed.

 

I believe that for me it was worth it but everybody has different circumstances.

[FrankFinancial]

 

Has anybody got experience of making voluntary Class 2 or Class 3 NI contributions to make up gaps up to the 30 year requirement for state pension benefits?As I read the HMRC website, I can make up to 6 years of backdated Class 2 contributions at around £2.90 ish per week because I was previously "ordinarily" employed in the UK up to the date I emigrated. Can anybody confirm what "ordinarily" means? A full time job with an employer for more than three years prior to emigrating and full Class 1 contributions made to the date I left?The other alternative is Class 3 contributions at around £15 ish a week, but these are obviously more expensive and give less benefits, in the unlikely even i had to return to the UK.I just see people on here talking about the more expensive and less beneficial Class 3 contributions and wonder why you can't make Class 2 contributions instead?

I f you have worked and lived in the UK for a total of 3 years before leaving Australia you can make extra voluntary contributions to boost one’s UK pension entitlement. You seem to have met this requirement. If you do not plan to return to the UK, there is no difference to the pension benefits you receive (Class 3 entitles you to additional benefits in the UK). In order to be eligible to qualify for class 2 contributions you need to have been in employment in the UK before leaving and also in Australia at the time of application.Yes you are correct in terms of backdating contributions. A key point to consider in your calculations is that currently the UK state pension paid to an Australian resident is not indexed for inflation in payment which means over time the payment is eroded by inflation.

[Playghirl]

Following.

[winter1]

I f you have worked and lived in the UK for a total of 3 years before leaving Australia you can make extra voluntary contributions to boost one’s UK pension entitlement. You seem to have met this requirement. If you do not plan to return to the UK, there is no difference to the pension benefits you receive (Class 3 entitles you to additional benefits in the UK). In order to be eligible to qualify for class 2 contributions you need to have been in employment in the UK before leaving and also in Australia at the time of application.Yes you are correct in terms of backdating contributions. A key point to consider in your calculations is that currently the UK state pension paid to an Australian resident is not indexed for inflation in payment which means over time the payment is eroded by inflation.

 

I believe that under the new rules the number of years to qualify will now be raised to 10 years from 3years and you can only pay extra if you have the minimum of 10.

 

see this article

http://www.thisismoney.co.uk/money/pensions/article-2262134/Flat-rate-state-pension-changes-explained-Winners-losers.html

[Peach]

I took the view that there were no guarantees that successive governments wouldn't make changes that would render my voluntary contributions worthless - so chose to stick the money into super instead.

[Marisawright]

I took the view that there were no guarantees that successive governments wouldn't make changes that would render my voluntary contributions worthless - so chose to stick the money into super instead.

 

You'll notice that every time they change the legislation, it's not retrospective so depending on your age, it may still be worth paying them.

[Peach]

You'll notice that every time they change the legislation, it's not retrospective so depending on your age, it may still be worth paying them.

 

I still have no confidence in what future governments may decide to implement on people who aren't in a position to vote against them..

[Marisawright]

I still have no confidence in what future governments may decide to implement on people who aren't in a position to vote against them..

 

By that do you mean, you see your retirement as being in Australia not the UK? If that's the case, then I can understand what you mean - both Australia and the UK have made collecting the pension overseas significantly harder in recent years, and who knows if they'll do it again?

 

For me it still makes sense, because the contributions aren't a huge amount of money. It's a gamble, if you like - if the gamble pays off then I should get back a lot more than I paid in.

[Peach]

I'm also at least 28 years (and counting) away from retirement -- a lot can happen in that time. )

[Keith and Linda]

I took the view that there were no guarantees that successive governments wouldn't make changes that would render my voluntary contributions worthless - so chose to stick the money into super instead.

 

Sort of with you on this Peach, compounding super payments could far outweigh pension payment, plus if you pass away your money is paid to your beneficiaries, whereas your pension more than likely ends when you do, but I will make a last minute judgment call when the time comes.

[Playghirl]

My OH firmly believes there won't be any state pensions when our time comes, I do see your point Peach!

[le petit roi]

My OH firmly believes there won't be any state pensions when our time comes, I do see your point Peach!

 

....and your OH may be wrong. I believe some form of State support for pensions will remain; what form that support takes is the $64000 question. Will it be keeping the status quo or the means testing of pensions being phased in, who really knows? The only thing I am certain of is that politicians won't lose any of their pension benefits.

[winter1]

I have tried unsuccessfully to find the article that said under the new system from 2016 that you need more than 10 years already credited to be able to contribute for extra years rather than the 3 previously quoted and currently stated on the Directgov website.

 

However I would ask for clarification from DWP before making extra contributions if you only hold less than 10 years credits.

 

As of Autumn in the UK you are meant to be able to get a forecast for the post 2016 pension if you are in your late 50's and early 60's. This forecast should also give an idea of the extra contributions you are allowed to make.

 

There has been criticism that the new pension is an attack on the wives of expats as they can no longer rely on a husbands contributions record, only their own. It is an attempt to deny the pension to many who have no other connection to the UK than by marriage. However it has also caught many UK based spouses who have a poor contribution record.

 

 

 

https://www.gov.uk/new-state-pension/overview

 

see this article

http://www.thisismoney.co.uk/money/pensions/article-2262134/Flat-rate-state-pension-changes-explained-Winners-losers.html

[Marisawright]

As of Autumn in the UK you are meant to be able to get a forecast for the post 2016 pension if you are in your late 50's and early 60's. This forecast should also give an idea of the extra contributions you are allowed to make.

 

I'm in that situation and I've already got a pension forecast based on the new rules.

[winter1]

I'm in that situation and I've already got a pension forecast based on the new rules.

 

Does it show deductions for contracting out years as in if you were in a workplace pension scheme?

 

As there is meant to be deductions from the flat rate "£144" for any year you were in such a scheme. Also any S2P or Serps benefits.

I had a forecast last year based on the new scheme but the finer details won't be available till around September this year as far as I was aware. It was also meant to tell you what extra contributions you could make.

[Andrew from Vista Financial]

I have tried unsuccessfully to find the article that said under the new system from 2016 that you need more than 10 years already credited to be able to contribute for extra years rather than the 3 previously quoted and currently stated on the Directgov website.

 

However I would ask for clarification from DWP before making extra contributions if you only hold less than 10 years credits.

 

As of Autumn in the UK you are meant to be able to get a forecast for the post 2016 pension if you are in your late 50's and early 60's. This forecast should also give an idea of the extra contributions you are allowed to make.

 

There has been criticism that the new pension is an attack on the wives of expats as they can no longer rely on a husbands contributions record, only their own. It is an attempt to deny the pension to many who have no other connection to the UK than by marriage. However it has also caught many UK based spouses who have a poor contribution record.

 

 

 

https://www.gov.uk/new-state-pension/overview

 

see this article

http://www.thisismoney.co.uk/money/pensions/article-2262134/Flat-rate-state-pension-changes-explained-Winners-losers.html

 

 

This should help: https://www.gov.uk/government/publications/the-single-tier-pension-a-simple-foundation-for-saving--2

 

First PDF, page 9, first bullet point.

 

KR

 

Andy

[winter1]

This should help: https://www.gov.uk/government/publications/the-single-tier-pension-a-simple-foundation-for-saving--2

 

First PDF, page 9, first bullet point.

 

KR

 

Andy

 

 

Thanks Andrew,

It is still not clear what the threshold in number of years you will already have to have made whilst working in the UK to be allowed to make extra voluntary contributions. Currently this is set at 3 years but with the increase to 7 or 10 years this may change. Years ago when I inquired I was allowed to contribute but my wife who had under 11 years was not.

I believe that if we were to retire to the UK Her working time in Australia up until 2001 when the reciprocal agreement was cancelled could be counted as credited years. However in Australia this wouldn't count.

[Playghirl]

Winter that is also my understanding. The years prior to 2001 count.

[Marisawright]

Thanks Andrew,

It is still not clear what the threshold in number of years you will already have to have made whilst working in the UK to be allowed to make extra voluntary contributions. Currently this is set at 3 years but with the increase to 7 or 10 years this may change. Years ago when I inquired I was allowed to contribute but my wife who had under 11 years was not.

I believe that if we were to retire to the UK Her working time in Australia up until 2001 when the reciprocal agreement was cancelled could be counted as credited years. However in Australia this wouldn't count.

 

It's very simple to find out, just write in and ask for a forecast. I recently asked for a re-forecast and I got one no problem.

[winter1]

It's very simple to find out, just write in and ask for a forecast. I recently asked for a re-forecast and I got one no problem.

 

Hi Marisa,

I got a quote in 2013 but it did not have details of how many years I would get an abatement in the £144 base level for years of contracted out payment. This will not be available till around September as far as I was aware.

Did your re-forecast include this information?

The original statements from the UK Government led people to believe that you would get the £144 plus any serps or S2p.

In practice they have now said there will be deductions from the base £144 to take account of the lower contracted out National insurance contributions you make when you are in an employer pension. You still get the same number of years of NI credited but it buys you a slightly lower annual figure for these years.

[Marisawright]

Hi Marisa,

I got a quote in 2013 but it did not have details of how many years I would get an abatement in the £144 base level for years of contracted out payment. .

 

Can't help you with that, as I was never contracted out.