Age 30, no pension.. where to start?

koolcat99

Hi
I am 30 now no pension, have been working abroad for many years so very little NI contributions.
I have personal investments, but no pension whatsoever, I am self employed at the moment, whats the best thing to do for me?

dunstonh

Self employed means you dont get the second state pension and your past history hits your qualification as well. So, you are going to be heavily reliant on your own provision.

So, you need to be doing something. Whats best will depend on a number of things and will vary depending on how you intend to buy as well as your knowledge, investment experience and what features and options you want.

koolcat99

Why would self employed make me worse off? I pay much more in NI contributions being self employed than if I was employed?
Where is the best place to start to look?
Also, as much as I realise that this is a necesity, I can no way afford to pay more than £100 a month.

Dithering_Dad

I'd start with trying to get your state pension in order. Get a state pension forecast from here: http://www.thepensionservice.gov.uk/state-pension/forecast/home.asp

It will tell you how many entitlement years you have built up and will also inform you of years you have missed. I believe you are allowed to make class 3 NI contributions to buy some of the 'missing' years. I did this when I worked overseas. I think you can go back 5 or 7 years. You only need 30 years of contributions to get a full state pension, and as you are aged 30, you still have just enough time left before retirement to buld these up, even if you have zero entitlement years so far. It might be an idea to make some contributions anyway just to make absolutely certain that you get a full pension.

As far as being self-employed. Do you work under a limited company framework or are you actually classed as self-employed? True self employed people pay less NI and do not therefore contribute to the state second pension.

The pension forecast will also tell you your entitlement, if any, to S2P.

dunstonh

Why would self employed make me worse off?

You dont qualify for the second state pension, only the basic, when you are self employed.

I pay much more in NI contributions being self employed than if I was employed?

No you dont. You pay less.

Where is the best place to start to look?

If you want advice, then use an IFA. If you want to DIY then you have to choose the type of pension, the provider and the investment funds.

Also, as much as I realise that this is a necesity, I can no way afford to pay more than £100 a month.

Its not a lot and wont do you much good in retirement but its a start. Your state retirement age is 67 so with that amount (and ignoring any other provision you may have), early retirement is unlikely to be a prospect for you. You should look to increase that annually to get to a much more reasonable figure.

EdInvestor

Dithering_Dad wrote: »

I'd start with trying to get your state pension in order. Get a state pension forecast from here: http://www.thepensionservice.gov.uk/state-pension/forecast/home.asp

It will tell you how many entitlement years you have built up and will also inform you of years you have missed. I believe you are allowed to make class 3 NI contributions to buy some of the 'missing' years. I did this when I worked overseas. I think you can go back 5 or 7 years.

Since around 2000, employed expats were allowed to pay class 2 NI contriutions towards the state pension, (same as self employed onshore) which are very cheap. Currently you can pay up to 10 missing years, best to get on this case asap as the number will shortly go down.

Dithering_Dad

EdInvestor wrote: »

Since around 2000, employed expats were allowed to pay class 2 NI contriutions towards the state pension, (same as self employed onshore) which are very cheap. Currently you can pay up to 10 missing years, best to get on this case asap as the number will shortly go down.

Thanks ED. I have a mate who is still overseas and makes class 2 contributions. I'm sure though that when I came back from working abroad and got a pension forecast, I was allowed to make class 3 contributions for the years I was away.

I'll have a look to see if I kept any of the documention. Not sure if class 3 contributions give you anything more than class 2, mind you.

Edit: actually class 2 contribs seem to be better than class 3's, even though class 3's cost a heck of a lot more??? : http://expat-village.com/article_2703.shtml

"Making voluntary National Insurance contributions to maintain your UK state pension entitlement is a worthwhile consideration while living abroad.

Class 2 contributions, which you are able to make if you are working overseas, protect your entitlement to UK social security benefits such as incapacity benefit and maternity allowance as well as the state pension.

So, if planning to return to the UK at any point, you know you are covered for all these things. Class 3 contributions only add towards state pension entitlement, but can be paid whether living overseas or not.

Class 3 contributions cost £7.35 a week, while Class 2 contributions are £2.10."

EdInvestor

Dithering_Dad wrote: »

I'm sure though that when I came back from working abroad and got a pension forecast, I was allowed to make class 3 contributions for the years I was away.

When was that? Before around 2000, you could only pay class 3 conts if overseas.That still applies to people who don't work when abroad (eg accompanying spouses). If you've been wrongly advised, chase them up for a refund.

Dithering_Dad

EdInvestor wrote: »

When was that? Before around 2000, you could only pay class 3 conts if overseas.That still applies to people who don't work when abroad (eg accompanying spouses). If you've been wrongly advised, chase them up for a refund.

It was 2001. I paid them in 2003 when I got a pension forecast and they noted that I had missed a year's worth of NI for that year. I can't remember the exact figure but I'm sure I paid about 300 odd quid, and I know it was a class 3 because I didn't even know that NI had any classes until then.

EdInvestor

Here's some info on the sequence of events. It looks as though you could have opted to pay class 2.

Class 2 NICs history

If you were dealing with the onshore Pension Service rather than Newcastle it's possible they weren't aware that there was a choice.