State Pension with insufficient years N.I. (self employed) advice please.

Maharishi

Hello people, I am in a bit of a quandary and need some serious advice, so I have turned to the sage minds that inhabit these boards for assistance ...

I am 61 in June 2017, male, and have worked since Nov 1971. In 1982, I began a career as a sole trader, in a self emplyed capacity, as a pub and club musician and entertainer, and I am still continuing along this route some 35 years later. It's a career that is shrinking by the day as venues close and cut back.

I never expected to live very long as my family has a terrible history of heart attacks and strokes. My mother, (whom I take after closely), came from an 8 strong family none of whom made it to 60. They all went in their 40s and 50s. Hence my personal view on my potential longevity.

Obviously I have 11 years contributions between '71 and '82, when I was a PAYE employee but, since I started the music I have paid nothing at all. My accounts have never shown enough profit to trigger the threshhold whereby you are obliged to pay a percentage. Even now, I only "take home" between £5.5K and £7K for the last 5 years. Even if I wanted to pay voluntarily, there is just insufficient money to do so - as it is, my wife supports me as I often earn below my share of the joint outgoings.

What I want to know is this; she has some savings which she has indicated that she would be prepared to lend me if I could buy extra years N.I. to correct the shortfall. I'm not happy about this as I feel that she does more than enough for me as it is. However;

1. Can you buy years of class 2 N.I. retrospectively?
2. How many and at what cost?
3. If not, and I retire with 11 years and only receive 11/35 of a state pension, am I expected to survive on that or are there other options.

Thank you for reading and please don't judge. Typing this has been quite difficult.

Dazed_and_confused

Profits ma not be high enough to need to pay class 4 National insurance (the % bit) but why haven't you been paying class 2 NIC for the past few years as your profits seem well over the threshold for this to be necessary (and beneficial)

jamesd

If you are able to buy past years as class 3 it is excellent value for money and you should. Each year before 6 April 2016 will increase your state pension entitlement by 1/30th the basic state pension until you get to 30 years, then nothing beyond 30.

Years from 6 April onwards give an increase of 1/35th the flat rate pension.

You probably have three years of juvenile credits on top of the eleven working years, taking you to fourteen. You can normally buy six past years which would get you to twenty. At the current £115.95 a week basic state pension this would be an increase from 14/30*115.95=54.11 to 20/30*115.95=77.30.

It appears that you have six more years to state pension age. Class 2 NI while you can or class 3 after that would also be a good move. The potential gain is 6/35*155.65=26.68. That could get you to a combined state pension of £103.98.

You will also have some earnings-related additional state pension.

jamesd

Better than class 3 is class 2. Much cheaper. Well worth seeing if you can do old class 2 that you should have paid.

As I understand it you will:

1. Get up to six years of NI credits
2. Have to pay for every year you should have paid from 1982 onwards. But probably no penalties.

Since class 2 today is only £2.80 a week at the moment, so £145.60 a year while class 3 is £14.10 a week, £733.20 a year the class 2 arrears might well be cheaper even with all of the extra years.

jamesd

You're between 55 and 74 years old. You're wife may be as well. At your earning level you can make an extra £720 a tax year by paying £2880 net into a pension, getting the tax relief that increases it to £3600 then taking it out. You get the tax relief even if you didn't pay any tax. 25% comes out as a tax free lump sum and 75% as taxable income.

Is either of you looking after grandchildren? It's a way to get NI credits.

Dazed_and_confused

Did your 2015:16 Self assessment tax bill not include an amount due for class 2 NIC (used to be payable by direct debit but is included in self assessment from 2015:16).

You can go onto your personal tax account on gov.uk and see the actual amount of pension you will get (and exactly how many year NIC you've got built up)

jamesd

There are means tested benefits available based on household income from state pension age.

You may also be eligible for working tax credits or other benefits now, if your household income is low enough. Have you ever had a benefits check like those done by CAB? You might start by looking at entitledto.

xylophone

Have you obtained a new state pension forecast

https://www.gov.uk/yourstatepension?utm_source=Mail-Online&utm_medium=Partnership&utm_campaign=GTKY

You are married so see also https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181235/derived-inherited-entitlement.pdf

Tabbytabbitha

Maharishi wrote: »

Hello people, I am in a bit of a quandary and need some serious advice, so I have turned to the sage minds that inhabit these boards for assistance ...

I am 61 in June 2017, male, and have worked since Nov 1971. In 1982, I began a career as a sole trader, in a self emplyed capacity, as a pub and club musician and entertainer, and I am still continuing along this route some 35 years later. It's a career that is shrinking by the day as venues close and cut back.

I never expected to live very long as my family has a terrible history of heart attacks and strokes. My mother, (whom I take after closely), came from an 8 strong family none of whom made it to 60. They all went in their 40s and 50s. Hence my personal view on my potential longevity.

Obviously I have 11 years contributions between '71 and '82, when I was a PAYE employee but, since I started the music I have paid nothing at all. My accounts have never shown enough profit to trigger the threshhold whereby you are obliged to pay a percentage. Even now, I only "take home" between £5.5K and £7K for the last 5 years. Even if I wanted to pay voluntarily, there is just insufficient money to do so - as it is, my wife supports me as I often earn below my share of the joint outgoings.

What I want to know is this; she has some savings which she has indicated that she would be prepared to lend me if I could buy extra years N.I. to correct the shortfall. I'm not happy about this as I feel that she does more than enough for me as it is. However;

1. Can you buy years of class 2 N.I. retrospectively?
2. How many and at what cost?
3. If not, and I retire with 11 years and only receive 11/35 of a state pension, am I expected to survive on that or are there other options.

Thank you for reading and please don't judge. Typing this has been quite difficult.

Any state benefits will be based on household income.

jamesd

It appears that you may be able to go back as far as 2006 because of your date of birth. That's only specifically for voluntary contributions but it might also apply to any years you should have been paying but didn't.

If this does apply to you, you might be able to get four more pre-2016 years and that much closer to the maximum flat rate.

MyOnlyPost

Your wife would have received NI credits if you had children and received child benefit. The credits are paid from when the eldest is born until the youngest is 12. If during this time your wife was also working and getting NI credits from employment it may be possible to transfer the child benefit credits to you

https://www.gov.uk/government/publications/national-insurance-credits-for-parents-and-carers-cf411a