Shortfall in National Insurance Contributions

atush

patman99 wrote: »

My S-in-L and my B-in-l's wife are stuffed then. neither has done a days work in their lives and are both approaching 50.

having worked since age 16 (age 13 for non offical things) I think that any one who 'has never worked a day in their lives' shouldn't be entitled to anything. If they want benefits, i'd like to see them forced into at least part time voluntary work.

A lot of people on here mentioning shortfalls in contribs. Dont' hesitate to get an actual forcast. Some will have another 3 years they didn't realise, and others who looked after children to age 12 (perhaps the B inL's wife?) (16 before) will have years for that as well. And if you are on most benefits you also get NI contributions.

fellwalker09

I think that any one who 'has never worked a day in their lives' shouldn't be entitled to anything. If they want benefits, i'd like to see them forced into at least part time voluntary work.

Your views are quite strong and I can understand your point. However, there are and will always be a percentage of people who, through no fault of their own, are unable to work or even do voluntary work -disability is something that creates many barriers and I should know -my mum is disabled as is my eldest son -and I'm talking about severe disability. My son is also a wheelchair user. One can't really assert opinions such as yours above, when not all factors have been taken into account. It is also offensive and I rather thought this forum was a friendly one and there to provide advice/help to others, as opposed to condemning others.

WhiteHorse

I was advised many years ago to obtain (and keep, forever), a pension forecast every year. I was also advised to make voluntary contributions (get, and keep, receipts), to ensure that my record was 100%.

Why? An insider admitted to me the NI system is in utter chaos. People are expecting full pensions only to be told that their record is missing, incomplete or deficient.

Bear in mind too, that contribution requirements are flexible and that the government moves the goalposts on a regular basis. It is essential to check frequently and keep paperwork, as they will cheat you if they can.

Itismehonest

jamesd wrote: »

The pot is how much the current generation can be taxed to pay for pensions for those who are retired. It only runs out if we run out of people of working age. Not likely to happen.

What happens when the amount put in by the working population is insufficient to cover the sum necessary for pensions? In other words when y million comes in but 2x y is needed to cover the pensions?

jamesd

Not likely to happen since the current value is about 28% of a retired person per working person and the forecast is for it to increase to about 48% by around 2035 as we move to the time when all of the baby boomers have retired (source is figure 1.6 in the First report of the Turner Pensions Commission).

In 2010 the total dependency ratio, both under 15s and over 64s, was 51% of a person not working per worker in the UK.

If it did happen the result would be increased borrowing by the country for the duration of the bulge and/or decreased pension payouts.

Of more practical concern is whether the costs will remain acceptable to the working population. Keeping those costs at a tolerable level as life expectancies increase is part of why we're seeing increases in state and public sector pension ages.

atush

fellwalker09 wrote: »

I think that any one who 'has never worked a day in their lives' shouldn't be entitled to anything. If they want benefits, i'd like to see them forced into at least part time voluntary work.

Your views are quite strong and I can understand your point. However, there are and will always be a percentage of people who, through no fault of their own, are unable to work or even do voluntary work -disability is something that creates many barriers and I should know -my mum is disabled as is my eldest son -and I'm talking about severe disability. My son is also a wheelchair user. One can't really assert opinions such as yours above, when not all factors have been taken into account. It is also offensive and I rather thought this forum was a friendly one and there to provide advice/help to others, as opposed to condemning others.

I was clearly NOT talking about disabled people (althouhg i know quite a few who work). I was clearly talking about able bodied people.

stagey_2

seven-day-weekend wrote: »

The £130 is based on ALL income. So as well as your £97 basic State :Pension, you may, for example, have some SERPS (S2P), and/or an Occupational or Private Pension. These will be totalled up and if your TOTAL income is less than £130 it will be made up to £130 by means-tested Pension Credit.

hi - my total pensionable income will be under this amount pw- can I claim pension credit even if married and OH gets a total pensionable income of about £12000 pa(which will be taxed! of course)

User_Name_2-2

Will somone explain exactly how the amount to make up a gap in National Insurance contributions (NICs) is calculated in general, please?

Having, finally, finished this, I realise it's become a huge message, but please try to read it!

I understand the basic principle that if one's income is below the lower earnings limit (LEL) for a suitable period then one must pay an amount equal to a number of weeks at the relevant Class-3 rate for that tax year, but I don't know exactly how either the amount or the number of weeks is derived, though obviously one can be deduced from the other.

I've spent a lot of time on the HMRC, Pension Service, CAB, DirectGov, AccountingWeb and MoneySavingExpert websites, in particular, I've read all the posts in this thread, but I've not seen any exact calculations, though one poster did ask about it tangentially, with no answer.

The NICs are based around weeks, and I don't understand how they are converted to be monthly or yearly in practice.

Consider the tax year from 2010 to 2011. The LEL for that tax year is £97 weekly, £421 monthly and £5,044 yearly; the corresponding earnings threshold (ET), at which one pays contributions is £110 weekly, £476 monthly and £5,715 yearly; the Class-3 rate, £12.05.

For a first example, imagine a sole employement in that year for the month of February for which one is paid £420. This is below the monthly LEL. This seems to indicate that one would have a gap of a full year of 52 weeks in employment contributing to benefits, leading to an amount to be made up of 52 weeks times £12.05, which is £626.60.

However, February has 28 days, and as 4 times 7 is 28, the employment is for 4 weeks. This means the weekly earnings are £420 divided by 4, which is £105 and is above the weekly LEL. This seems to indicate that those 4 weeks do contribute to benefits, leaving a gap of the full 52-week year less 4 weeks, so 48 weeks, leading to an amount to be made up of 48 weeks times £12.05, which is £578.40.

For a second example, imagine a sole employment in that year for the months of July, August and September, for which one is paid £2,000 each month.

Think of the employment in terms of weeks. The total earnings are 3 times £2,000, which is £6,000. There are 31 days in each of July and August; and 30, in September. This is a total of 92 days, and as 7 times 13 is 91, the employment is for a little over 13 weeks. This means the weekly earnings are a little less than £6,000 divided by 13, which is £461.54 and is well above the weekly LEL. This seems to indicate that those 13 weeks contribute to benefits, leaving a gap of the full 52-week less 13 weeks, so 39 weeks, leading to an amount to be made up of 39 weeks times £12.05 per week, which is £469.95.

Think now of the employment in terms of months. The earnings each month are £2,000, which is well above the monthly LEL. The employment is for a total of 3 months, which leaves a gap of 9 months. If each month is 4 weeks, then this is a gap of 36 weeks, leading to an amount to be made up of 36 weeks times £12.05 per week, which is £433.80. Although if the the 3 months employment is converted to weeks at 4 weeks a month, then there are 12 weeks contributing to benefits, leading to a gaph of the full 52-week year less 12 weeks, so 40 weeks, leading to an amount to be made up of 40 weeks times £12.05, which is £482.00.

Finally, think of the employment in terms of years. The total earnings are £6000, which is well above the yearly LEL of £5,044, and NIDirect, at the page titled "Understanding The Basic State Pension", indicates that a qualifying year is one in which one pays more than the yearly LEL. This seems to indicate that there is no gap at all, leading to an amount to be made up of £0.00.

I want to understand how the amount to make up a gap is calculated, what would happen in the case of two overlapping employments and what effect paying some earnings into a work's contracted-out pension scheme would have. Hence I'm interested in the following, preferably with links to webpages with confirmation.

1. Explain how the amounts to make up gaps are calculated in general.
2. Demonstrate how the rules apply in the first example above.
3. Demonstrate how the rules apply in the second example above.
4. Explain what effect making pension contributions, whilst sometimes being beneath the LEL, would have.
5. Explain what would happen in the case of two overlapping employments, one paid weekly, one monthly, and both with pay that varies between being above and below the corresponding LELs.

If you've reached this far, I admire your diligence!

If you have an answer to any of the questions I am very impressed!

User_Name_2-2

Can anyone even explain what the amount to make up a shortfall will be if one earns £4000 in the tax year 2010 to 2011?

Little_Mo_70

User_Name_2 wrote: »

Will somone explain exactly how the amount to make up a gap in National Insurance contributions (NICs) is calculated in general, please?

Be prepared to be impressed......I read it all:D
I can see why the other poster you mentioned, asking the same questions, got no replies.

However, I have to admit I have to pass on the answers.
You are right, none of all the sites available give the exact answers to your questions.

My advice would be to either write to pensions people - letter worded as your posting - or contact CAB personally.

One more suggestion would be to get a 'Gap in your NI record letter' on Gov.uk site. The info in that may answer some of your queries.

Sorry for this useless answer. Best of luck in your quest:o