Class 2 - to pay or not to pay?

ManicMum

Hello

I am self-employed and pay class 2. I am wondering whether to get Small Earnings Exemption. I know class 2 will give me incapacity benefit etc if needed but of what benefit is the pension element? Is the pension provided any different to if I never worked my whole life? ie. the basic old age pension? or is it enhanced in some way? I am confused.

Thanks

Hammyman

It affects how much State Pension you get. However if you get lower state pension then currently pension credits top that up so you end up with the same amount. However there is no guarantee that in X years time pension credits or even the state pension will be around. If you've made 30 years contributions, then you'll get full state pension anyway so it is only contributions based benefits excluding JSA that will be affected.

ManicMum

Thx Hammyman. So you are saying it is worth paying it?

Interesting what you say about state pension possibly not being around in 30 yrs. What will people live on then who haven't made any provision for themselves? At the moment it seems people less likely to do so as can't afford the contributions. Do you think there may be some compulsory system? I think they have that in Australia as when I worked there you had superannuation taken out of your wages whether you liked it or not.

I find all this pension thing confusing. My husband has private pension but think it worth less than what he has actually put into it in cash. Depressing!!

Hammyman

Well TBH it depends on your circumstances. For me it has been worth it as I ended up on ESA for a short period and it was only because of my Class 2 NIC that I got anything.

Regarding the private pensions, I think there are many in the same boat as your husband. I chose to put the money in bricks and mortar instead.

ManicMum

Hmm, yes I had a BTL too but sold it as hubby started losing a lot of income. I think in hindsight we could have kept hold of it and rents have rocketed but hey, at least I get to sleep at night and virtually own my home outright. May look at that again in a few years when I have a decent job (hopefully) other than chief cook and bottlewasher.

ESA - is that means-tested? Would I be able to claim anything like that if partner works?

jetplane

I would say yes its worth paying them they are £2.50 a week = £130 a year. And as contributions count towards later years even if the only thing you ever need to claim is ESA you stand to get more than you pay.

ESA is paid if you are too sick to work so imagine sometime in 2013 or 2014 you have to take time off sick and you get nothing because you didn't pay £130 this year? 2 weeks ESA is more than £130.

ESA is only means tested if you don't pay your contributions.

rogerblack

jetplane wrote: »

ESA is only means tested if you don't pay your contributions.

Or if you become too ill to work, but not completely disabled, and it lasts longer than a year. (changes upcoming in april)