40 Years of NI contributions = £119.35 :(

bowlhead99

noh wrote: »

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.

Breaking even in pound note terms is not difficult.

For example, someone who earns £90k pays about £5k a year. After doing that for the minimum 35 years to get full pension they will have paid in £175k.

Then as they draw their state pension at about £8k a year (inflation linked) from (say) age 66 to 88, they get the 175k back.

Obviously assuming that fixed salary the same each year for decades is not real world numbers, and NI rates and the pension system have changed over the years anyway. Just throwing some numbers out there.

Of course, putting £5k a year into the NI system and breaking even in pound note terms or even in real terms is not as good as what you could have got by investing £4.5k a year privately for 35 years in your own choice of investments, if you hadn't been forced to 'over contribute' compared to the £500 a year that someone on a more modest £12k salary would pay for the same retirement benefit. And there is even more of an 'excess contribution' going on in the background, because when someone on a £90k salary throws £5k into the NI pot, their employer throws over £11k into the NI pot too.

But greater amounts of cash being contributed by people with the biggest incomes is how most types of tax work. The people earning the £90k rather than the £12k are only really able to earn that sort of money because of what the country gives them in return for their taxes, such as infrastructure, a capable workforce with a welfare system and NHS system supporting it, and other fundamentals which are key to making and keeping money, such as regulations and rule of law.

We all have our preferences on how taxes should be spent and how much should be on pensions vs other welfare vs other services, and how the state pension should be split between people who can afford to contribute and people who need to receive. But saying that we have been 'ripped off' is a bit of a nonsense really. I'll make no secret of the fact that I would prefer the old system where I could get a £250pw pension instead of £155pw or whatever, but any tax-neutral change is going to have winners and losers.

And any change which is not tax neutral, and wants more money to be paid out, means more money would need to be paid in from somewhere (whether through income tax, corporation tax, national insurance, tax on investments etc) and I would rather not be paying more taxes to help the person on £50k or £100k get a pension that's 4 or 8 times the pension that the person on £12k gets.

bigfreddiel

noh wrote: »

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.

But of course your NICs pay for more than just state pension, NHS, dental care and many other dip into your pot of contributions.

So it's not that simple, before even taking inflation into consideration.

Gers

Gers wrote: »

I've just phoned HMRC (surprisingly easy first thing this morning) - the agent I spoke to wasn't particularly helpful though that probably wasn't her fault.

She told me to write to them requesting a refund and stating why. I've printed off a form from the website. The archived section gives a new link which then links back to the archived page!
Then I rang DWP, the agent there confirmed that 2015 / 16 are of no benefit to me. She also explained that, to get the full SP, I need to make payments for two years. Payments in 2016 / 17 will enhance my SP by £4.45 and in 2017 / 18 by £3.41 to take me the full pension.

I dug out my forecast from July 2016 which has-



I'll post off the form this morning.

HUGE thanks to frank777 for pointing out the problem, Jem16 and DMcG too.

:T:T:T

Refund cheque arrived today!

Gers

I've checked my NI record / pension forecast this morning and 2016 / 17 is now a 'full year' despite only having paid £179 odd in contributions. In my last year of full time work, before I 'retired' I paid over £2,500.

2015 / 16 has gaps, but I'm not falling for that one again! I only have to work some more of my very part time hours to get up the max SP.

So, now 46 years of full NI contributions with one year not.

Esox

Now "retired" (whatever that means these days).

However, being previously "contracted out", have a projected shortfall in my new state pension amount.

Also have the opportunity to work 1 or 2 days a week doing some consultancy work:

If I work for one day a week (gross £150.10), I pay 20% tax but no NICs (earnings below the Primary Threshold (PT) for the start of NICs = £157)

...plus, as that level of pay is above the Lower Earnings Limit (LEL) of £113, I also get a weekly credit towards my future state pension

If I work two days a week (gross £300.20), I pay 20% tax and 12% NICs on everything above £157 (which, as it applies for most of the second day, totals = 32%)

...and no additional state pension credit

In summary, there seems to be a bit of a “sweet spot” in working just the one day a week.

GunJack

Esox wrote: »

Now "retired" (whatever that means these days).

However, being previously "contracted out", have a projected shortfall in my new state pension amount.

Also have the opportunity to work 1 or 2 days a week doing some consultancy work:

If I work for one day a week (gross £150.10), I pay 20% tax but no NICs (earnings below the Primary Threshold (PT) for the start of NICs = £157)

...plus, as that level of pay is above the Lower Earnings Limit (LEL) of £113, I also get a weekly credit towards my future state pension

If I work two days a week (gross £300.20), I pay 20% tax and 12% NICs on everything above £157 (which, as it applies for most of the second day, totals = 32%)

...and no additional state pension credit

In summary, there seems to be a bit of a “sweet spot” in working just the one day a week.

surely the fact that you're paying NI will give you enough for a qualifying year if you do 2 days a week for about 18 weeks in the FY? It just means you're not getting the year credited "free" (in NI terms)

Have you got an up-to-date SP forecast? Do you know how many more years you need??

Plus, there'll be no tax on 1 day a week unless you have other income and you go over the personal allowance....

Esox

surely the fact that you're paying NI will give you enough for a qualifying year if you do 2 days a week for about 18 weeks in the FY? It just means you're not getting the year credited "free" (in NI terms)

I have made an assumption that, within a given tax year, the contribution towards nSP is considered on a weekly basis. So, doing 1 day a week for 52 weeks would get you one year's worth of nSP benefit.

Or is there some kind of threshold trigger point, where X weeks out 52 gains a full year of nSP entitlement?

Have you got an up-to-date SP forecast? Do you know how many more years you need??

Currently six NIC years short of a full nSP

Plus, there'll be no tax on 1 day a week unless you have other income and you go over the personal allowance....

DB pension in payment, so 20% tax from the get go on any additional earnings.

By working 1 day a week, the intention is to avoid is the 32% deductions zone (20% tax + 12% NIC)

When working the second day in a week, that extra day would attract £48 in deductions out of £150 gross earnings (with no additional nSP benefit).

GunJack

Esox wrote: »

I have made an assumption that, within a given tax year, the contribution towards nSP is considered on a weekly basis. So, doing 1 day a week for 52 weeks would get you one year's worth of nSP benefit.

Or is there some kind of threshold trigger point, where X weeks out 52 gains a full year of nSP entitlement?



Currently six NIC years short of a full nSP



DB pension in payment, so 20% tax from the get go on any additional earnings.

By working 1 day a week, the intention is to avoid is the 32% deductions zone (20% tax + 12% NIC)

When working the second day in a week, that extra day would attract £48 in deductions out of £150 gross earnings (with no additional nSP benefit).

OK, clearer now on tax. As for NI, there was some discussion recently on here that, providing you earn at least the £5k-odd in a year to get the NI credit for that year, you could earn it in as long or short period of that year...can't remember the exact details, sorry, but someone will probably fill them in

jamesperrett

GunJack wrote: »

As for NI, there was some discussion recently on here that, providing you earn at least the £5k-odd in a year to get the NI credit for that year, you could earn it in as long or short period of that year...can't remember the exact details, sorry, but someone will probably fill them in

You need to earn over a certain threshold in each qualifying period so all the weeks when you earn £150 will count but, if you only do half a day per week some weeks, those weeks won't count towards your NI.

There is also a maximum that you can earn - something like £3800 per month. If you earn any more than that it won't be used in your NI calculation.

xylophone

https://www.taxguideforstudents.org.uk/going-abroad/national-insurance

A ‘qualifying year’ sounds as though you might need to have a perfect 52 weeks of working for it to count. In fact, for ‘Class 1’ NICs, any tax year where you receive a minimum amount of earnings or credits (which you receive for example, if you cannot work because you are bringing up children who are aged under 12) can be a qualifying year. The 2017/18 tax year could be ‘banked’ as a qualifying year provided you have earned the equivalent of 52 x £113 (this amount is known as the Lower Earnings Limit) – total £5,876. Please note that any pay periods in which you have earned under the Lower Earnings Limit will not count towards the total.



http://www.litrg.org.uk/tax-guides/employed/what-national-insurance-do-i-pay-employee