Excess National Insurance Contributions

madgamers

My advice to all those who really want to find out more about their National Insurance contrinutions, and what their pension is likely to be, contact the people in the know, i.e ME (I work at the National Insurance Contributions Office in Newcastle) on the following numbers:

National Insurance office: 084591 53002

Pensions Forecasting Team: 0845 3000 168 (Not for those who are within 10 days of retirement age)

Pensions Service: 0845 60 60 265 (Everyone)

I will be happy to answer the odd question on here for people, but trust me. It is much better to phone us up, and then we can give you better answers as we will be able to look at your account, and provide our professional expertise.

jamesd

madgamers, would you mind posting that invitation to take questions in a topic on its own, perhaps called "ask a pension forecaster" or similar? Then it'll be easier for people to find, even if you do often have to say "call us".

A few starter questions:

1. Is there a reliable S2P calculator around anywhere online so you can do what-if analysis or estimate your S2P provision with different salary assumptions? The official site seems to lag so if your circumstances have changed it takes a while before you can get a good prediction. Trying to get the data for the change in earnings over the last few decades and predictions for the next few so you can try to apply the S2P pension calculating rules is a bit fiddly, as are the rules themselves.

2. What are the assumptions used in calculating the pension predictions on the web site?

3. If someone is say male, single, 42 years old, has insignificant accumulated SERPS or S2P provision, currently earning around the maximum NI contributions limit and happy to invest 100% in equities, what effect does this have on the pros and cons of contracting out today?

4. Why do you have to let your employer know your state pension benefits to get a combined private and state pension forecast? Wouldn't it be less of a compromise of the privacy of those who want it if the employer supplied their current private pension data to the Pensions Office and the employee supplied the details of their other private pensions so they could get a combined result for all their pensions without compromising their privacy?

EdInvestor

madgamers wrote:

My advice to all those who really want to find out more about their National Insurance contrinutions, and what their pension is likely to be, contact the people in the know, i.e ME (I work at the National Insurance Contributions Office in Newcastle) on the following numbers:

National Insurance office: 084591 53002

Pensions Forecasting Team: 0845 3000 168 (Not for those who are within 10 days of retirement age)

Pensions Service: 0845 60 60 265 (Everyone)

I will be happy to answer the odd question on here for people, but trust me. It is much better to phone us up, and then we can give you better answers as we will be able to look at your account, and provide our professional expertise.

This is the "official link", same place?

http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp

Milarky

madgamers wrote:

My advice to all those who really want to find out more about their National Insurance contributions, and what their pension is likely to be, contact the people in the know, i.e ME (I work at the National Insurance Contributions Office in Newcastle) on the following numbers:

Except the original poster is in the happy position of already being eligible for the full basic state penson - she is 58 and has 42 years paid up already (only needs 39) . Her point was why she continues to pay NI if she works - she doesn't see any benefit.

[I should have added that it may be beneficial to work past the qualifying years needed for the BSP - and this will become even more the case after 2010 once that number of years is cut drastically - because the state additional pension - currently called 'S2P' - conitnues to accrue benefit for 49 years. But to accrue this 'right' you must have earned at least £5035 in that year -ie. have made that a 'qualifying year' for the basic entitlement. However my other point about job-splitting remains a valid one: only the level of earnings is relevent for both basic and additional elements - so that no (or upto £550 less per job) NI need actually be paid where you can arrange to work in more than a single employment.]

CIS

because the state additional pension - currently called 'S2P' - conitnues to accrue benefit for 49 years.

That confirms what I thought, thats one of thw reasons Ive been telling people not to jump to hasty decisions about trying to stop paying NI once they get to 30yrs.
It'll turn in to another fiasco in 20or30yrs when people have stopped paying NI after 30yr, get to pension age, and then wonder why their S2P is only 3/5ths of the maximum .

jamesd

So say someone is 42 and has few basic state pension qualifying years so far. That presumably means that they would get a lower return on their contributions than someone with a higher number of qualifying years and make it more likely that they would benefit from contracting out?

This might well apply to those who have mostly worked abroad or new immigrants.

Milarky

jamesd wrote:

So say someone is 42 and has few basic state pension qualifying years so far. That presumably means that they would get a lower return on their contributions than someone with a higher number of qualifying years and make it more likely that they would benefit from contracting out?

This might well apply to those who have mostly worked abroad or new immigrants.

It should not make much difference as I see it. Each year of a working lifetime ('16-64') that is unqualified for the basic state pension is equally unqualified for the additional pension (and vice versa) . You are working towards each simultaneously. The 'return' each year can therefore be reckoned at '1/30th' of the BSE per year PLUS roughly '1/49th' of the additional pension. After 2012 the revaluation of both parts will be the same index - the NAE index which is above inflaton. Also additional pension is now practically 'earnings un-related' - you either get a big 'chunk' or none at all. Thus the AP stacks up much like the BSP and the formula looks like:

Index^years x (0.03 x BSE + 0.02 x AP) ... years = 30,29,28,27....

for the first 30 years

then

Index^years x (0.02 x AP) ... years = 19,18,17,16...

for the final 19 years

In other words the combined state pension is largely flat rate now (and in the future) and what you get is more or less added to at one of two rates of accrual. A person in mid-life with missing years actually accrues combined benefits more 'quickly' (because they are still adding BSP years) than a person of the same age with a fuller track record (because they get to the secondary period sooner). That's not to say that the latter person won't receive extra benefit through the AP - clearly they will if they have contributed to it for longer - but it does mean each additional year may add less at a certain stage....

Andy_Davies

angrytaxpayer wrote:

I am a female aged 58 and to date have paid 42 years' national insurance contribitions which is 3 years more than I need to qualify for the full government pension. I intend to work until 60 when I will then have paid 5 years more than I need to. Does anyone know if I can 'exempt' myself from this extra tax as I am paying nearly 10% more tax than most people? My husband will also have paid 5 years more than he needs to by the time he is 65. There won't be many people in this position but enough I think to try to do something about it.

NI doesn't pay for your pension though, it's just another tax - they just use it to work out what pension you're entitled too.

Can't see how you came to the conclusion that you're paying 10% more tax than other people, simple fact is everyone below state pension age is liable to pay it (providing they earn enough)

In my world I'd merge NI with income tax ('cos that's what it really is). We can then have a simpler tax system without the costs of managing NI.