Pension top-up costs rise by 50% but does NI contributions:

THENOX

Hello,

Does anyone know whether 50% rise in year top-up rate for State Pension is a reflection of 50% rise in relevant class of NI contributions or is it restricted only to buying a missing year situation?

If the second is true it might mean that it would be better to pay the amount of weekly contributions of relevant class and this making up for certain year then doing it voluntarily in a lumpsum. Currently I earn just below the treshold due to part time work. If the second is true does anyone know how can I make myself to pay it weekly at the lower overall rate then became a victim of this rise from tax year 2009/2010?

PS: Working more is not an option ;):D

THX,

THE NOX

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Robbing Us Blind...

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THENOX

bump bump!

jancee_2

Not sure I understand the question.

If working more hours isn't an option then you have no choice but to pay the Class 3 voluntary contributions either in instalments or after the year has ended. Same cost either way.

THENOX

jancee wrote: »

Not sure I understand the question.
If working more hours isn't an option then you have no choice but to pay the Class 3 voluntary contributions either in instalments or after the year has ended. Same cost either way.

Hmm: As far as I know class 1 contributions pay for the State Pension if one works more than their threshold and they do not rise. When one didn't pay enough of them Revenue gives you the chance to pay (for the given year to count) but this is regarded as class 3 (which goes up 50%).

So it looks like when you work above the threshold you pay state pension of class 1 that does not rise but when you are below of class 3 which do rise. - I'm not sure if this is true -need someone to confirm this and if it is to suggest what can be done to mitigate its negative consequences.

THX in advance,


THE NOX

jancee_2

Yes, that's correct. Class 1 contributions are 11% on earnings above the threshold of £110. But you are deemed as having paid on earnings of £95 or over in this tax year.

Class 3 voluntary contributions have risen to £12.05 per week. So as I said, if you can't increase your hours so you are earning £95 per week or more then you have no choice but to pay Class 3.

THENOX

jancee wrote: »

Yes, that's correct. Class 1 contributions are 11% on earnings above the threshold of £110. But you are deemed as having paid on earnings of £95 or over in this tax year.

Could you tell me what do you mean by "But you are deemed as having paid on earnings of £95 or over in this tax year." ?

I usually earn odd: £94,55 but when I dump my holiday credit, work 4 days a week (before bank holidays) or stay a bit longer I earn just above the £95 but not in all weeks -is this calculated by year and averaged or strictly by week.

THX for your help,

THE NOX

Milarky

It's calculated on a week-by-week basis (or monthly if paid monthly). So if your earnings fluctuate above and below the threshold of £95 and you are paid weekly only the weeks where they exceeded £95 will count - and the rest will not.

Just to note that if you do have a shortfall for this new tax year 2009/10 the NI contribution people at Newcastle are very slow asking you to make a top up. You have until the end of tax year 2011/12 to top-up at the £12.05 weekly rate and they should write to you about 8-6 months before the end of that tax year (So make a note in your diary!)

No wonder some people forget and lose track when the government are so inefficient themselves

jancee_2

THENOX wrote: »

Could you tell me what do you mean by "But you are deemed as having paid on earnings of £95 or over in this tax year." ?

I usually earn odd: £94,55 but when I dump my holiday credit, work 4 days a week (before bank holidays) or stay a bit longer I earn just above the £95 but not in all weeks -is this calculated by year and averaged or strictly by week.

THX for your help,

THE NOX

In a week where you earn £95 or more, even though you do not actually pay any NI as an employee at that level [you only start paying when it reaches £110 in a week] it counts towards the year total. If you have some weeks where you earn this much and some weeks you don't then after the end of the year you can pay for the non qualifying weeks, but this IS at the Voluntary Class 3 rate.

THENOX

Would you be able to tell me is this threshold of £95 set for 2009/2010 tax year?

jancee_2

THENOX wrote: »

Would you be able to tell me is this threshold of £95 set for 2009/2010 tax year?

Yes. It's on the HMRC website.

THENOX

Brilliant! Thanks so much for your help! :cool: