NI contributions - sate pension

Ben10101

Hi,

I have recently been offered a job abroad and I am currently weighing up the options.

I am 32 years old, UK national.

Re. NI contributions, is there any issue with taking a break from paying these? I will be returning to the UK in 1 year and I am confident that I will have time to get enough stamps (35 years of stamps required).

However, I have been told that if you stop paying NI then "you have to start again" with paying your NI and a break is not allowed. Please can someone clarify if a 'break' in NI payments is possible?

Thank you,
Ben

Dazed_and_confused

However, I have been told that if you stop paying NI then "you have to start again" with paying your NI and a break is not allowed.

Who told you that and why aren't you asking them?

If you stop paying and return to the UK to work (and earn above the relevant threshold) then yes you would have to start paying again. What makes you think you could get away with not paying?

Mojisola

Ben10101 wrote: »

However, I have been told that if you stop paying NI then "you have to start again" with paying your NI and a break is not allowed. Please can someone clarify if a 'break' in NI payments is possible?

The years don't have to be continuous, if that's what you mean.

jamesd

Ben10101 wrote: »

I have been told that if you stop paying NI then "you have to start again" with paying your NI and a break is not allowed.

You can have an unlimited number of breaks and you lose nothing. A minimum of ten years in total is required to get any UK state pension.

Each year does need to have a minimum paid in to count. You can make voluntary payments if a year is short. You can also choose to make voluntary contributions while abroad if you like.

nigelbb

It’s an absolute no-brainer to continue paying NI contributions while working overseas. You pay at the reduced Class 2 rate of currently £3/week so for each full year of £156 you earn pension of about £4.80 per week. You only have to draw pension for 33 weeks to get your contributions back.

jamesd

Ben10101 already has 15 or 16 years and has some 36 years available to get the extra 20 or so years for a maximum single tier state pension. £156 for the year is cheap but it could easily be wasted money if many years are worked in the UK. If there's a plan to retire early, say at 55, it could be a good move anyway.

There can also be restrictions depending on where the work is.

JasonPr

nigelbb wrote: »

It’s an absolute no-brainer to continue paying NI contributions while working overseas.

Not in all cases, as jamesd points out.


In addition to what jamesd said: if Ben is only away for one year, depending on how that year relates to the UK tax year, he might build up full NI contributions for both tax years anyway since you don't need a full year of NI to get a qualifying year if you earn enough.


BTW, even though that's not the question asked, OP should check about residence. If you're away for only a year, it's likely you'll stay UK resident which means tax is due on the foreign income.

nigelbb

jamesd wrote: »

Ben10101 already has 15 or 16 years and has some 36 years available to get the extra 20 or so years for a maximum single tier state pension.

Ben could have been contracted out for 13 or 14 years in which case he will need nearer to another 30 years contributions to be sure of a maximum single tier state pension.

jamesd

nigelbb wrote: »

Ben could have been contracted out for 13 or 14 years in which case he will need nearer to another 30 years contributions to be sure of a maximum single tier state pension.

Contracting out of the earnings-related portion of the state pension didn't prevent the years from counting as one year for either basic or single tier state pension. If Ben was contracted out for 14 years they are still counted.

It has never been possible to contract out of the whole state pension accrual. Neither as an individual nor by being in a contracted out defined benefit workplace pension.

nigelbb

jamesd wrote: »

Contracting out of the earnings-related portion of the state pension didn't prevent the years from counting as one year for either basic or single tier state pension. If Ben was contracted out for 14 years they are still counted.

It has never been possible to contract out of the whole state pension accrual. Neither as an individual nor by being in a contracted out defined benefit workplace pension.

Currently while we are in transition between the old & new pension schemes Ben10101will be entitled to a state pension that could be anything between the old minimum single tier pension at £129.20 a week & the new single tier pension at £168.60 a week all depending on how many years he was contracted out & how many years contributions he has. The only sure way of getting the full £168.60 is to have 35 years contributions from 2016 but that may not be necessary.

jamesd

nigelbb wrote: »

Ben10101will be entitled to a state pension that could be anything between the old minimum single tier pension at £129.20 a week & the new single tier pension at £168.60 a week all depending on how many years he was contracted out & how many years contributions he has.

Ben10101 will be entitled to the full single tier pension after paying in or being credited with a maximum of 22 more years assuming two post-2016 years and 13 pre-2016 at the moment.

We know this because the lowest possible pre-2016 contribution value is for a credited year or the slightly higher old rules contracted out year that includes a small earnings-related amount even when contracted out under the S2P system. That's 13/30 x 129.20 = 55.98 as the lowest Foundation Amount for April 2016. Two post-2016 years add 2/35 x 168.60 = 9.63 to take the total to 65.61. That's a shortfall of 168.60 - 65.61 = 102.99. Each additional post-2016 year adds 1/35 x 168.60 = 4.81. 102.99 / 4.81 = 21.4 so 22 more post-2016 years.

But there's no need for Ben10101 to rely on this because it's easy enough to check the actual contribution record.

nigelbb wrote: »

Currently while we are in transition between the old & new pension schemes Ben10101will be entitled to a state pension that could be anything between the old minimum single tier pension at £129.20 a week & the new single tier pension at £168.60 a week all depending on how many years he was contracted out & how many years contributions he has.

Ben10101 could currently have accrued nil or more than 168.60. A contracted in high earner could have exceeded the single tier maximum before April 2016 due to the old rules earnings-related portion and that higher value would be retained as the Foundation Amount. But it'd be rare for a 32 year old to manage it. A person with fewer than ten years has nil state pension entitlement.

nigelbb wrote: »

The only sure way of getting the full £168.60 is to have 35 years contributions from 2016 but that may not be necessary.

The easy way to be sure is to check online. Anyone with at least two pre-2016 years or any post-2016 needs 34 or fewer more years.