early retirement and National Insurance

dreaming

I am being made redundant later this year and am hoping to treat it as early retirement. I will be 58 and will take lump sum from work pension and draw pension of approx. 9k a year. After paying off mortgage I should have approx. 29k left which I was thinking I would invest in some fixed rate bonds/ISAs etc. (will be seeing IFA in next couple of months). I have looked on the hmrc site and that says that I have enough credit for State Pension at 66. Does this assume I will continue to pay NI contributions until then or does it mean as of now? Will I/should I continue to pay NI after redundancy.
Am hoping not to have to work full time, but may look for part-time at some point in future.

Torry_Quine

It means that you have enough NI contributions now as it has no idea what your future circumstance will be.. You will only pay NI if in the future you are earning enough but if not then none is payable.

bryanb

Torry_Quine wrote: »

You will only pay NI if in the future you are earning enough but if not then none is payable.

Surely that's true in all circumstances, nothing to do with retirement or age?

Torry_Quine

bryanb wrote: »

Surely that's true in all circumstances, nothing to do with retirement or age?

Absolutely but some people think that NI is payable from other sources of income.

CLAPTON

dreaming wrote: »

I am being made redundant later this year and am hoping to treat it as early retirement. I will be 58 and will take lump sum from work pension and draw pension of approx. 9k a year. After paying off mortgage I should have approx. 29k left which I was thinking I would invest in some fixed rate bonds/ISAs etc. (will be seeing IFA in next couple of months). I have looked on the hmrc site and that says that I have enough credit for State Pension at 66. Does this assume I will continue to pay NI contributions until then or does it mean as of now? Will I/should I continue to pay NI after redundancy.
Am hoping not to have to work full time, but may look for part-time at some point in future.

currently you only need 30 years of NI contributions for a full state pension
however the government has announced that this will change to 35 years when the new flat 'rate' pension is introduced (2017)

so how many years of contributions do you actually have?

CLAPTON

bryanb wrote: »

Surely that's true in all circumstances, nothing to do with retirement or age?

you are liable to pay NI until state retirement age

however whether you pay it depends upon your earned income (not pension, savings or dividend)

dreaming

Torry_Quine wrote: »

It means that you have enough NI contributions now as it has no idea what your future circumstance will be.. You will only pay NI if in the future you are earning enough but if not then none is payable.

Thanks.

Does that mean that if I don't work at all I won't pay NI on my pension, but if I take a job, either full or part-time, I will then have NI deducted? Do you know the earnings limit please?
Am hoping not to have to work as I should just be under the personal tax allowance next year and can cover outgoings (albeit frugally) on pension. Would have to look at how worthwhile working would be. Will have to look at interest on bank accounts etc. to minimise tax so looking at ISAs etc.

Torry_Quine

dreaming wrote: »

Thanks.

Does that mean that if I don't work at all I won't pay NI on my pension, but if I take a job, either full or part-time, I will then have NI deducted? Do you know the earnings limit please?
Am hoping not to have to work as I should just be under the personal tax allowance next year and can cover outgoings (albeit frugally) on pension. Would have to look at how worthwhile working would be. Will have to look at interest on bank accounts etc. to minimise tax so looking at ISAs etc.

That's it exactly. NI contributions are only payable on waged income. This link should help. http://www.hmrc.gov.uk/rates/nic.htm

CLAPTON

basically NI is paid at 12% on weekly wages on the amount over £146

dreaming

CLAPTON wrote: »

basically NI is paid at 12% on weekly wages on the amount over £146

Torry_Quine wrote: »

That's it exactly. NI contributions are only payable on waged income. This link should help. http://www.hmrc.gov.uk/rates/nic.htm

Thanks both.

Just wanted to confirm that my thoughts were correct. I am trying to weigh up the pros and cons of trying to live on my work pension for 8 years (+ my lump sum and any income from that) until I can draw State pension as well. It seems to be do-able as far as I can see with little changes to lifestyle (I am a cheap date!) but I like to look at all options, and working part-time is a "fall-back" option so to speak, but if I just then end up having to pay tax and NI it needs to be worth it.

atush

You can earn up to 146 w/o paying NI. So look for work with pay and hours less than that? Might be nice to have a little extra so you don't have to live so frugally?

and you can claim JS while looking for said work. In the unlikely event you are offered FT employment and did not take it, you would have to stop taking JS. But maybe you would prefer to work?

Do you need to take the LS form the work pension? If your redundancy payment is large enough, perhaps the higher pension paid would be more useful to you?