Class 2 Contributions

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The abolition of Class 2 National Insurance contributions announced in the budget was portrayed as good thing. But how will those who have been paying Class 2 NI be able to build up contributions to the state pension? Will they end up not having enough contributions to make up a decent state pension when they are older?

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  • benniebert
    benniebert Posts: 666 Forumite
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    Hamster7 wrote: »
    The abolition of Class 2 National Insurance contributions announced in the budget was portrayed as good thing. But how will those who have been paying Class 2 NI be able to build up contributions to the state pension? Will they end up not having enough contributions to make up a decent state pension when they are older?

    eerrr they would be expected to make for their own pension provision by saving income instead of spending it?
  • densol_2
    densol_2 Posts: 1,189 Forumite
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    Class 2 ( or whatever they then call it ) is now being assessed at the end of the tax year with the tax return and class 4- rather than collected throughout the year
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  • Icequeen99
    Icequeen99 Posts: 3,775 Forumite
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    densol wrote: »
    Class 2 ( or whatever they then call it ) is now being assessed at the end of the tax year with the tax return and class 4- rather than collected throughout the year

    Yes, but it was announced in the Budget yesterday that in the next Parliament they would completely scrap Class 2.

    My understanding is that Class 4 will be amended to become relevant to contributory benefits. However, it could still leave some self-employed with lower earnings out of benefit entitlement and subject to paying more expensive Class 3 to fill the gaps. Depends on the detail.

    IQ
  • Freshstart2012
    Freshstart2012 Posts: 104 Forumite
    edited 19 March 2015 at 4:12PM
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    Icequeen99 wrote: »
    Yes, but it was announced in the Budget yesterday that in the next Parliament they would completely scrap Class 2.

    My understanding is that Class 4 will be amended to become relevant to contributory benefits. However, it could still leave some self-employed with lower earnings out of benefit entitlement and subject to paying more expensive Class 3 to fill the gaps. Depends on the detail.

    IQ
    Hi I was thinking along the same lines as you.
    I may be totally wrong but I think that their plan could be to take anyone who does not earn above a certain limit ( say the current excemption limit) out of the benefits system. They may allow you to make contributions voluntarily to avoid this happening, we will have to wait and see.
  • sammyjammy
    sammyjammy Posts: 7,410 Forumite
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    Icequeen99 wrote: »
    Yes, but it was announced in the Budget yesterday that in the next Parliament they would completely scrap Class 2.

    My understanding is that Class 4 will be amended to become relevant to contributory benefits. However, it could still leave some self-employed with lower earnings out of benefit entitlement and subject to paying more expensive Class 3 to fill the gaps. Depends on the detail.

    IQ


    This is no different to employed people who work parttime and don't earn enough to pay NI or be classed as paying it.
    "You've been reading SOS when it's just your clock reading 5:05 "
  • Hamster7
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    benniebert wrote: »
    eerrr they would be expected to make for their own pension provision by saving income instead of spending it?

    I think you're missing the point. This is not about private pension provision, which of course many of us already have, it is about qualifying for STATE pension, which requires 35 years of NI contributions.

    I am not talking about reckless spending, rather I am concerned about prudent saving towards the state pension scheme for which many of us have contributed many years and now are unsure if the replacement system will permit us to continue doing so.
  • Freshstart2012
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    Hamster7 wrote: »
    I think you're missing the point. This is not about private pension provision, which of course many of us already have, it is about qualifying for STATE pension, which requires 35 years of NI contributions.

    I am not talking about reckless spending, rather I am concerned about prudent saving towards the state pension scheme for which many of us have contributed many years and now are unsure if the replacement system will permit us to continue doing so.

    Totally agree with you, I have been Self Employed for most of my working life and have paid Class 2 religiously even at the times of my life when business wasn't great and I could of applied for an exemption, however I carried on paying to ensure that I would still be entitled to a basic pension.
  • midnight_express
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    Anyone can make voluntary contributions.
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