NI Rebate

K_and_N

Hi All,

I've come across a website saying people can get a rebate on some of National Insurance.

They said current rules allow you to opt out of the State 2nd Pension and rebate these contributions to your own savings plan. The average rebate is about £1,600.

Does anyone know if it's true? If it is, how do I claim them?

Thank you for your help.

K and N

dunstonh

Its a regulated activity and the sites that are doing this look anything but compliant.

It is probably wrong to refer to it as a rebate. Its certainly misleading.

Its old name used to be contracting out of SERPS. Now it is known as contracting out of the state second pension.

By contracting out you are giving up the second state pension qualification for the years you contract out and its place the HMRC pay your pension provider a rebate of NI. The amount of rebate will depend on your age and your income. You dont need a new pension necessarily for this. Many existing pensions running can do it.

The sites that do this contracting out all seem to do it without financial advice but charge full whack for doing it. So, you may as well see an IFA and get it done (or not) under the consumer protection of advice and probably get it cheaper as well as the contract they do it on is not great.

Contracting out requires you to have decent investments and understand that you could get less or more depending on your investment returns. There is also an optimal age to be contracted in by as well as an optimal income.

Finally, contracting out is being abolished in 2012. So its hardly worth the effort for most people.

K_and_N

Thank you for your explanation.

As it requires decent investment, it's not something for us.

Thanks anyway.

K and N

dunstonh wrote: »

Its a regulated activity and the sites that are doing this look anything but compliant.

It is probably wrong to refer to it as a rebate. Its certainly misleading.

Its old name used to be contracting out of SERPS. Now it is known as contracting out of the state second pension.

By contracting out you are giving up the second state pension qualification for the years you contract out and its place the HMRC pay your pension provider a rebate of NI. The amount of rebate will depend on your age and your income. You dont need a new pension necessarily for this. Many existing pensions running can do it.

The sites that do this contracting out all seem to do it without financial advice but charge full whack for doing it. So, you may as well see an IFA and get it done (or not) under the consumer protection of advice and probably get it cheaper as well as the contract they do it on is not great.

Contracting out requires you to have decent investments and understand that you could get less or more depending on your investment returns. There is also an optimal age to be contracted in by as well as an optimal income.

Finally, contracting out is being abolished in 2012. So its hardly worth the effort for most people.