MSE News: Budget 2012: Single state pension plan confirmed

StevieJ

AnneD wrote: »

Hi to everybody.

It is great everyone is taking a look at all this, as we are all trying towork out what it all means. I did a study of mine and I THINK this is what isgoing on. It may help people see what my calculations look like.


In advance I apologise that this is rather long. Also I apologise if someonefinds a flaw in this reasoning of mine or the maths. I am also trying to seewhat it all means and may have missed something crucial!

Good luck to all.

Excellent analysis thanks, one thing I could point out is that voluntary contributions made after 2017 will be at a higher level than before due to the higher pension.

AnneD

Stevie J

Yes you are quite right. The post April 2017 contributions are, no doubt, going to be more expensive to cover the full 144 pounds.

But also, the later anyone leaves paying the pre 2017 contributions...well they go up in price each year too, I believe, if you don't pay by their deadlines.

I took a quick look at the latest charges for the pre 2017 contributions.

- Class 2 which is for certain self-employed people seems to be 2.65 pounds a week.

- But Class 3 which is the voluntary catch up contributions are currently 13.25 pounds a week or 689 pounds a year.

gadgetmind

AnneD wrote: »

- Class 2 which is for certain self-employed people

Why only "certain" people?

AnneD

gadgetmind

The rules are intricate, so please do not rely on me for tax planning. But here is an idea of what I think might be going on.

I was looking at the website for the gov.uk. It has a page 'who can pay voluntary contributions'.

There is a table on there of who exactly can pay them, including:

Self employed with profits under £5,595 and a ‘Small Earnings Certificate’ can pay class 2 or 3

I am not an expert on self-employed, but it seems as if those people above, have profits below what is normally required to start making actual NHI payments on profits. So instead they are allowed to make voluntary ones. I am not sure why those above might elect to pay either class 2 or class 3. Maybe they get more advantages if they make the higher class 3 contributions?

There is also another page on that site for all self-employed people whose profits are over 5,595 pounds and it gives amounts for Class 2 and 4 contributions that they have to pay, so it seems there are various rules for self-employed in general, depending on how much profit they make.

gadgetmind

AnneD wrote: »

I am not an expert on self-employed, but it seems as if those people above, have profits below what is normally required to start making actual NHI payments on profits. So instead they are allowed to make voluntary ones. I am not sure why those above might elect to pay either class 2 or class 3. Maybe they get more advantages if they make the higher class 3 contributions?

Yes, my wife chooses to make voluntary class 2 contributions despite very merge earnings and for this gets another year towards basic state pension (soon to be flat rate) which seems like a total bargain. In fact, it seems like such a bargain that I live in fear of finding some regulation that says she shouldn't actually be doing it!

Your "certain" made the hairs on the back of my neck stand up a trifle!

Yes, class 3 does get you more, but I still don't think it counts towards S2P despite the much higher cost.

[edit]

Class 3 actually seems to count towards fewer benefits than class 2!

AnneD

Sorry to have frightened you both.

Just to say, the folks at HMRC and gov.uk are going to have immense fun dafting all this onto their websites when all the new rules come in.

gadgetmind

We must be paying thousands of people to handle all these incessant changes. No wonder taxation is so high!

AnneD

They always say about the complicated United States tax laws, that if they brought in a flat tax rate and threw everything else out, countless people would lose their jobs, both government and private advisors.

gadgetmind

AnneD wrote: »

countless people would lose their jobs

But a job doing something that's pretty unnecessary in the grand scheme of things, yet causes a serious drag on every tax payer, is a job that we *should* be striving to get rid of.

The Japanese aim for 100% employment by inventing jobs and look where that's go them. Yes, is it nice that when two blokes are digging a hole in the pavement that another six are waving illuminated wands to warn you of it, and even politely recommending ways past (walk on the bit where there isn't a hole), but the barriers that are also there can probably do the job on their own.

AnneD

My opinion is it is getting harder to resolve due to globalisation and computerisation (makes the world much more intricate and complicated). And also vested interests and lobby groups in the home country, of course.