Contracting in/out

whambamboo

I pay myself £6k/year in salary through my personal LTD company, with the rest of my income coming through dividends from the company

I am therefore paying a few pounds a week of NI (very little).

I am 24.

About a year ago I was employed, and the financial adviser sent round by the company said he couldn't tell us what to do, but said that if you contracted out, an extra few % of the NI would go into the pension plan, and he said by the time we retired the state pension might not be worth having, but it was our free choice whether to contract in or not - but based on his presentation most people I spoke to chose to contract out.

I didn't work there long, and I think the pension, a Standard Life effort (unfortunately I didn't get a windfall as I invested too late), is worth about £2,000.

Anyway, I'm now not contributing to a pension at all, nor having any contributions made for me. So I'm wondering about contracting back in. Someone suggested that I wasn't earning enough to earn the second pension so it was a moot point, can anyone say whether this is the case?

Also, how many years can you contribute for? I.e. if you have say 40 years of NI contributions, is there any point in making more? And is the monetary value of the state second pension based on the value of the contributions or simply the years you made them?

Oh finally, I forgot I had contracted out, and I've actually been paying the full whack of employer's and employee's NI (although this probably amounts to only a few £ per month). Do I need to actively contract back in, and if not, should I just reduce the rates I'm paying of NI back down to the contracted amount.

My wife also pays a small amount of class 4 + 2national insurance weekly on her self employment (completely separate from mine), and is also getting paid the personal allowance (£4800/year) by my company, which is enough to be above the lower earnings limit, but below the primary threshold.

Is she earning her maximum state second pension?

jamesd

I tend to look on the state second pension as some useful spreading of risk and then plan to make most of my pension provision elsewhere. If all the private things fail, maybe the government will survive. Or vice-versa.

Others will have to answer on the specifics.