40 Years of NI contributions = £119.35 :(

bigfreddiel

Bootsox wrote: »

Your statement only gives one side to the story.

Gordon Brown's constant meddling with NI rates and thresholds meant that plenty of people ended up paying a lot more in NICs.

The small saving in being contacted out was completely swamped by the more than doubling of the NICs I ended up paying:

£1,743 in 96/97
£3,798 in 09/10

Saying that people must have a lower pension because they were contracted out is just a lame excuse to squeeze more money out of the taxpayer via Class 3 NICs.

Correct fj

jerrysimon

At least most of us contracted out, now have DB pensions

Jerry

MJD

:huh: It is all very confusing but I think I may have worked it out - although can someone confirm for me please?

I currently have 36 years of full NI contributions
For 30 of those years I was contracted out

I have 15 years left until I reach state pension age

I am currently working part time and am paying NI contributions and I envisage that I will continue doing this until I reach state pension age.

My state pension estimate based on my National Insurance record up to 5 April 2016 is £123.45 a week

My forecast if I contribute another 8 years before 5 April 2031 is the full amount of £155.65 a week

I also have a small 'self employment' on which I pay tax but my annual profit falls below the Threshold for National Insurance so I don't have to pay NI on this ...... but I can if I want to.

Am I correct in thinking that so long as I pay NI through my current employment for at least 8 years (I have already said that I intend to work at least 15 years to state pension age) then there is no benefit to me to pay NI on my 'self employment' as all I would be doing is lining the treasury pocket needlessly?

molerat

MJD wrote: »

,,,,,,,,,,,,,,,

Yes you are correct in your thinking.

MJD

molerat wrote: »

Yes you are correct in your thinking.

:j Many thanks - I am just finalising my tax return for last year and was getting to the point about wondering whether to pay the NI or not - I shall save my self the bother :T

Muscle750

it should go on the total money youve contributed in NI not the number of years its another rip off by the powers that be you could have someone earning 40k a year contracted out for 10 years and get reducded SP yet you can have someone on £12k a year in the whole time and get the full amount.........................i think lol

bowlhead99

Muscle750 wrote: »

it should go on the total money youve contributed in NI not the number of years its another rip off by the powers that be you could have someone earning 40k a year contracted out for 10 years and get reducded SP yet you can have someone on £12k a year in the whole time and get the full amount.........................i think lol

The system is basically, if you paid all the NI you should have paid, for the amount of money you were earning, you get your state retirement benefits. Getting the certain standard amount of government money in retirement, every year for the rest of your life, is a reward for "fully paying your dues". That sounds fair and not a rip off. It doesn't mean someone on 48k or 84k needs 4x or 7x as much state pension at someone on 10k.

Of course, "fully paying your dues" might be £5k of national insurance a year if you are earning £84k, and only £0.5k a year if you are only earning £12k, and only £0 a year if you are only earning £0 because you are a stay-at-home parent looking after a toddler. We are not all supposed to pay the exact same amount of "dues" because we all earn different amounts of money and have a different ability to pay taxes.

If you don't pay all the NI you 'should' have paid and instead chose to opt out of the system and pay a discounted rate of NI so that you could put money into a company pension or private scheme, giving you an alternate source of income in retirement, and having not paid as much as the 'normal' level of NI for your earnings - then there will need to be some sort of reduction to what you get compared to someone who always paid full rate and didn't get the chance to build up those private pension assets. Again, that sounds fair to me.

So, your example of the £40k contracted out person getting smaller benefits than the £12k contracted in person is just the result of the operation of the two fair systems above.

The £40k contracted out person was paying only £3.3k of his £3.8k standard rate, and throwing that £500 a year into a personal pension pot or more likely a lucrative employer DB scheme. So of course he doesn't deserve as much money from the government as the person who paid full whack. He chose to take money that the government asks everyone of his pay grade to pay, and spend it on himself.

Meanwhile the £12k person is only paying £500 total because when you don't have a lot of salary you aren't asked for a lot of contribution, but they are paying every penny of what they were asked for, and have not been deducting money from what they were asked for and throwing it into a private scheme. So they are granted a 'full pension' for doing their bit and paying 'full contributions', whereas the person who chose to build up private assets instead of pay full contributions, does not get a full pension.

I expect this will fall on deaf ears because you are the type of person who thinks that everything's a rip off wherever you perceive someone to be getting something better than you.

Bootsox

The big rip off is the disconnect between the total number pound notes you have paid into the system vs what you get out.

GunJack

Bootsox wrote: »

The big rip off is the disconnect between the total number pound notes you have paid into the system vs what you get out.

So you've never used the NHS? Claimed NI-related benefits? You'll never need either of those things and more before you hit SPA??

NI pays for more than just State Pensions.....

noh

Bootsox wrote: »

The big rip off is the disconnect between the total number pound notes you have paid into the system vs what you get out.

I have just added up my total employee NI contributions paid over the last 44 years (they are listed in your personal digital tax account).

I have contributed £55195.35
My forecast state pension on those contributions is £164.29 a week.
Therefore I will need to receive my state pension for 336 weeks around 6.5 years before I break even in pound note terms. I hope I will be able to do that and more. Thats not even counting the services of the NHS that I have used and will no doubt need to use more in the future.