UK Pension Class 2 or 3

[ozni]

Hello,

Was wondering on what the exact criteria was for the payment of class 2 o3 payments to make up missing years? Read the info on it and it says working before you leave the uk qualifies for class2. When they say working before you leave do they mean the day before, not claiming benefit or what? Left the Uk but was working on a casual basis as partner had job abroad (they wen't working beforehand for several months but wasn't claiming any benefits.

 

Thanks Oliver

[Marisawright]

I'd suggest trying to pay class 2 and see what happens. If you don't qualify they'll let you know.

[Johnny Kash]

I got approved for Class 2 contributions after working on a casual (contract) basis up until around 2 weeks before we headed out here 

I got another qualifying year for working up until early August of that year which I was quite surprised at given my relatively low earnings in the UK and only part way through the tax year.

Im not sure what criteria HMRC use to determine the applications but as others have said, definitely worth applying as theyre great value if you do qualify.    Im just leaving mine ticking over until I hit the 35 years although theres always the threat the UK govt will change things again!

[ozni]

Thanks for that Johnny. So if I can prove that I had employment in the UK until just leaving that sounds good. Do you know if you have to continuously been employed in Oz to claim or can you only claim for the times you worked here? I find the form very confusing to fill in and probably will struggle with the information they reguest  ie exact dates etc.  I worked in Oz.

Oliver

[Marisawright]

7 hours ago, ozni said:

Thanks for that Johnny. So if I can prove that I had employment in the UK until just leaving that sounds good. Do you know if you have to continuously been employed in Oz to claim or can you only claim for the times you worked here? I find the form very confusing to fill in and probably will struggle with the information they reguest  ie exact dates etc.  I worked in Oz.

Oliver

Your work record in Australia has nothing to do with it.

[ozni]

The form and background seems to suggest that if your not working abroad you cant claim class 2 credits only class 3. Maybe my misunderstanding.

[Marisawright]

3 hours ago, ozni said:

The form and background seems to suggest that if your not working abroad you cant claim class 2 credits only class 3. Maybe my misunderstanding.

Oops, sorry, I just paid class 3 so I'd forgotten about the class 2 criteria.

[Lavers]

On 13/04/2023 at 13:50, Johnny Kash said:

I got approved for Class 2 contributions after working on a casual (contract) basis up until around 2 weeks before we headed out here 

I got another qualifying year for working up until early August of that year which I was quite surprised at given my relatively low earnings in the UK and only part way through the tax year.

Im not sure what criteria HMRC use to determine the applications but as others have said, definitely worth applying as theyre great value if you do qualify.    Im just leaving mine ticking over until I hit the 35 years although theres always the threat the UK govt will change things again!

Do you need to get 35 yrs? I only need 30.

I got a yrs credit even though we came out here in the June, was pleasantly surprised.

Edited April 14, 2023 by Lavers

[Johnny Kash]

8 hours ago, Lavers said:

Do you need to get 35 yrs? I only need 30.

I got a yrs credit even though we came out here in the June, was pleasantly surprised.

It used to be 30 Lavers, now 35 to get the maximum.   UK Govt keep changing things!

Theyre continually looking at raising the state pension age as well, I think the only reason they didnt at the last budget was due to the backlash from voters and probably looking at the French reaction.   And we all know the UK loves a good riot  

I do think at some point in the future the UK state pension will be means tested, similar to here in Oz.   Im happy to hedge my bets and as mentioned before, if you can snag Class II contributions its ridiculously good value for what you get in return, and even Class III worth considering depending on your circumstances.   Personally I think its not a bad thing to have income coming in GBP and AUD when you reach the old gipper stage  

[InnerVoice]

2 hours ago, Johnny Kash said:

It used to be 30 Lavers, now 35 to get the maximum.   UK Govt keep changing things!

Theyre continually looking at raising the state pension age as well, I think the only reason they didnt at the last budget was due to the backlash from voters and probably looking at the French reaction.   And we all know the UK loves a good riot  

I do think at some point in the future the UK state pension will be means tested, similar to here in Oz.   Im happy to hedge my bets and as mentioned before, if you can snag Class II contributions its ridiculously good value for what you get in return, and even Class III worth considering depending on your circumstances.   Personally I think its not a bad thing to have income coming in GBP and AUD when you reach the old gipper stage  

It's been 35 years for a while, but it also depends on whether you opted out of SERPS back in the 90s in which case it might be more than 35 years. In my case it'd be about 38 years, not that I'm bothered as the Aussie government would just knock more off any Aged pension payment I received over here.

[Marisawright]

2 hours ago, InnerVoice said:

It's been 35 years for a while, but it also depends on whether you opted out of SERPS back in the 90s in which case it might be more than 35 years. In my case it'd be about 38 years, not that I'm bothered as the Aussie government would just knock more off any Aged pension payment I received over here.

I believe they only knock of 50 cents in the dollar.

[InnerVoice]

12 hours ago, Marisawright said:

I believe they only knock of 50 cents in the dollar.

I've paid up all my NI contributions for part-years so I only have full years remaining, and they're now £800 per year for Class 3 contributions. Based on their forecast, each complete year would increase my UK pension by about £5/week. On that basis it will take around 3 years for me to get my money back, so if Centrelink knocks off 50c in the dollar it would take me 6 years to reach break-even. That doesn't factor in the growth that £800 might make if it was invested as opposed to being the HMRC coffers either. Then there's my wife who'll be in her early 50s when I reach 67, and so that'd be another 25c in the dollar they'll deduct if she's still working.

I appreciate that for many it's a no-brainer to make voluntary NI contributions, especially if they can make Class 2, but in my case it'd be touch and go whether I'd reap the benefits. Maybe I should wait to see how decrepit I am at 67 and decide then!

[Marisawright]

2 minutes ago, InnerVoice said:

I've paid up all my NI contributions for part-years so I only have full years remaining, and they're now £800 per year for Class 3 contributions. Based on their forecast, each complete year would increase my UK pension by about £5/week. On that basis it will take around 3 years for me to get my money back, so if Centrelink knocks off 50c in the dollar it would take me 6 years to reach break-even

You're forgetting one thing.  You'll start getting the UK pension the day you reach pensionable age.    At what age will you run low enough on assets/income to qualify for the Centrelink pension?

[Ausvisitor]

15 hours ago, InnerVoice said:

It's been 35 years for a while, but it also depends on whether you opted out of SERPS back in the 90s in which case it might be more than 35 years. In my case it'd be about 38 years, not that I'm bothered as the Aussie government would just knock more off any Aged pension payment I received over here.

For anyone starting now it's 35 years.

For those who had paid in and not opted out of SERPS there was a levelling calculation done as the extra SERPS allowance you would have gotten got added back in as extra contributions.

I ended up needing 25 years of contributions and I'd already done 22 when the change came in, so it's totally possible lavers might only need 30 years

 

[InnerVoice]

30 minutes ago, Ausvisitor said:

For anyone starting now it's 35 years.

For those who had paid in and not opted out of SERPS there was a levelling calculation done as the extra SERPS allowance you would have gotten got added back in as extra contributions.

I ended up needing 25 years of contributions and I'd already done 22 when the change came in, so it's totally possible lavers might only need 30 years

I think it'd be 30 years in my case too if I hadn't opted out of SERPS but my financial advisor at the time informed me that at my age (late 20s back then) it was in my best interest to do so. Often wondered in hindsight whether that was good advice or not.

[InnerVoice]

1 hour ago, Marisawright said:

You're forgetting one thing.  You'll start getting the UK pension the day you reach pensionable age.    At what age will you run low enough on assets/income to qualify for the Centrelink pension?

At 67, I imagine!

I'm not planning on deliberately impoverishing myself just to get the Centrelink pension, but I intend to do a lot of things in my 60s that will cost money and generally enjoy life. They're the golden years of retirement, so in my opinion there's no point in squirrelling it all way just to spend the last few years of your life in a better quality nursing home.

[Marisawright]

21 minutes ago, InnerVoice said:

At 67, I imagine!

I'm not planning on deliberately impoverishing myself just to get the Centrelink pension, but I intend to do a lot of things in my 60s that will cost money and generally enjoy life. They're the golden years of retirement, so in my opinion there's no point in squirrelling it all way just to spend the last few years of your life in a better quality nursing home.

Wow.  So you're planning to live on the Australian aged pension from age 67 for the rest of your life?  I would find that prospect terrifying. I'm worried enough about the future even though I'm turning 70 this year and still have a substantial super balance.

[InnerVoice]

1 hour ago, Marisawright said:

Wow.  So you're planning to live on the Australian aged pension from age 67 for the rest of your life?  I would find that prospect terrifying. I'm worried enough about the future even though I'm turning 70 this year and still have a substantial super balance.

The Aged pension combined with my UK state pension and my wife working part-time, we should have $50-60,000 a year coming in. I think that's a pretty decent amount to live off if you don't have a mortgage or rent to pay. Once my wife reaches 60 she'll get her super, and that will also help.

[Marisawright]

27 minutes ago, InnerVoice said:

The Aged pension combined with my UK state pension and my wife working part-time, we should have $50-60,000 a year coming in. I think that's a pretty decent amount to live off if you don't have a mortgage or rent to pay. Once my wife reaches 60 she'll get her super, and that will also help.

But your wife’s salary and your UK pension and her super balance will all be taken into account for your eligibility so how much Centrelink pension would you get?

[InnerVoice]

4 hours ago, Marisawright said:

But your wife’s salary and your UK pension and her super balance will all be taken into account for your eligibility so how much Centrelink pension would you get?

I don't think my wife's super balance would be taken into account until she's 60, would it? I'd be 75 by then, by which time the income from the UK pension would be relatively less due to the lack of indexation. My Aged pension and UK pension combines would give me an income of $32k, but this would reduce to $24k if my wife was earning $30k. Above that, I'd lose $2.5k for every $10k she earned and then there's tax on her earnings but all in we wouldn't struggle too much, just as long as we can keep of the pokies.

[Marisawright]

9 minutes ago, InnerVoice said:

I don't think my wife's super balance would be taken into account until she's 60, would it

Worth checking.  It's an asset whether it's accessible or not, so I'm not sure.

[InnerVoice]

2 minutes ago, Marisawright said:

Worth checking.  It's an asset whether it's accessible or not, so I'm not sure.

Will do. That's a long way off yet - I might not even make it that far!

[Lavers]

10 hours ago, Ausvisitor said:

For anyone starting now it's 35 years.

For those who had paid in and not opted out of SERPS there was a levelling calculation done as the extra SERPS allowance you would have gotten got added back in as extra contributions.

I ended up needing 25 years of contributions and I'd already done 22 when the change came in, so it's totally possible lavers might only need 30 years

 

It was showing 30yrs when I left so hopefully it stays that way.