NIC liability question

boglehead

After almost 2 decades of hard work, frugal living and rigorous investment approach, my wife and I are planning to retire in 3-4 years, and live off of our investment portfolio, through equity dividends and bond interest.

Based on our asset allocations in tax advantaged accounts (mainly ISAs and pension), the dividends tax allowance, personal income tax allowances, Cap gain allowances etc, we should be able to pay little to no income tax/CGT.

However, I am lacking clarity on our potential NI liability. Given that we would still be in our 40s, we would technically not be retirees in the eyes of HMRC (earliest pension age being 57 for our generation), and hence fall in the NI-able age.
After doing a bit of research on internet, it doesn't seem that we would be liable to pay any NI contributions, as we would not be employed anymore, and that virtually 100% of our income would come from dividends/Cap gain.

Can you please confirm that this indeed correct?

Also, if we do not pay NI anymore, would we still be eligible for NHS coverage, free schooling for the kids etc...? After paying nearly £1m in income tax and NIC over our working lives, we wouldn't feel awkward in receiving something back despite not contributing to NI anymore.
We would definitely not want to claim any state pension, or child / housing benefits, as it would feel wrong.

Thanks for your input.

molerat

NICs are only payable on employment income - not on pensions, investment or capital gains income. You will be entitled to all the usual services but will not be entitled to any benefits that are directly attributable to NICs such as unemployment benefit. Your state pension would be calculated on your contributions to date so you will be entitled to some when the time comes but you could make class 3 voluntary contributions to increase that pension, currently set at around £14 per week, which will have a payback time of around 3-4 years and could prove a wise investment - probably better return than any other pension contribution. Why would you feel happy to claim NHS treatment but not a pension or child benefit - they are all funded by the same tax money paid by you and others ?

Spidernick

I would say that NICs are currently only payable on employment/self-employment income. As with any advice that is an important caveat, and there are certain quarters who feel this may be extended as an easy money grabber.

[Deleted User]

Spidernick wrote: »

I would say that NICs are currently only payable on employment/self-employment income. As with any advice that is an important caveat, and there are certain quarters who feel this may be extended as an easy money grabber.

Yes the long muted merger of tax and NIC (for how many years now?) could have interesting repercussions.

Cook_County

How you are budgeting to meet your own care costs? Unexpected health or other issues? Inflation? Stock markets bust cycles? House price falls? If you decide to have less State pension, you may find yourself more quickly reliant on other means tested benefits.

boglehead

Cook_County wrote: »

How you are budgeting to meet your own care costs? Unexpected health or other issues? Inflation? Stock markets bust cycles? House price falls? If you decide to have less State pension, you may find yourself more quickly reliant on other means tested benefits.

I am not assuming any state pension, especially since i will only have less than 20yrs of contribution, the amount received will be negligeable. Though i will look into molerat suggestion.

Inflation, market bust will be taken care of through a conservative "safe withdrawal rate" of 3% vs the well documented 4% which has been giving 100% success rate, despite weathering 6 crashes over the past 100yrs of data, where the market has lost about 50-60%, and inflation has gone as high as 12%. (As per FIREcalc). Without touch the capital.

House price fall doesn't worry us at all once we retire, as we won't draw any income from it - it will just mean a lower inheritance to our kids.

Health issues will be taken care of by the NHS, and the cost of retirement homes will be covered by our monthly income at the time.

We also planned education costs for 2 kids, which we are funding by filling their JISA to the max every year until they reach 18 y/o.