Retirement and NI Contributions

LinBWales

Hi, I have taken early retirement at the age of 56. I know that I no longer pay any NI contributions from my NHS pension. However I am planning on doing small amounts of work (zero hours / low paid / working from home). Because I do not have the requisite number of years to qualify for a full state pension (as people on the NHS pension schemed were contracted out for a while) I would like to pay some voluntary contributions from any earnings over and above my NHS pension. I am just confused about which class of contribution I should pay and how I go about paying! Any helpful advice appreciated.

molerat

If you are not self employed it will be class 3 contributions that would be required. If you earn in excess of £118 in a week you will be credited with class 1 for that week and if you earn 52 times that in a year you could be credited with a whole year. Likely best to wait until the end of the year and you could top up as necessary. https://www.gov.uk/pay-voluntary-class-3-national-insurance
Have you got a state pension forecast - how many years does it show you need ?

TriathNanEilean

I believe an alternative (and a cheaper one) is to pay class 2 NI contributions. Self employment profits determine what is available (or mandatory) but if they are under £6,365 you can pay voluntary class 2. see here


At least, that's what I'm about to try to do any day now. When I tried to pay them through self assessment last year the HMRC web form wouldn't let me so I'm going to try a phone call on the guess that I need to be registered first before the SA route will work.


So confirmation of this from someone would be appreciated.


[Edit: assuming self-employment - as molerat says, if not, class 2 won't be available]

Audaxer

I'll just been looking into this for my wife. As she is now working part-time on a self-employed basis, and will be earning less than £6,345 pa, she qualifies for Class 2 Voluntary Contributions at £3 per week. But the website says it is best to pay it through part of her Self Assessment Tax Bill.

snowgo

I'm in a similar position - I retired some years ago, with an occupational pension, when in my late 50s. I have done small amounts of self-employed work since then and I've paid class 2 NI contributions each year. Originally I was sent an invoice for my NI contributions each year, but more recently they have appeared on my self-assessment tax statement and I pay them on 31st January as part of the HMRC balancing payment due then.


This year is a bit different as I'm due to get state pension starting in January 2020. This date is a few weeks before the payment due date for 2018-19 NI contributions. On the state pension website it tells me that I have an incomplete year for the 2018-19 NI contributions, which is understandable as the NI payment hasn't yet been demanded by HMRC. But at the same time it tells me that my forecast pension amount (which is less than the maximum as I was contracted out for quite a number of years) is the maximum that I can get. Just a bit confused as to whether they will revise the pension amount once I've paid the 2018-19 contributions, or whether I'll make the NI payment at the end of January and find that the pension amount just stays the same. Any idea?

drumtochty

Advise what the figure is you have "earned as pension to date" and advise exactly the figure advised as the maximium you can recieve.


How many years contributions have been credited with in total and what is the contracted out deduction as advised on the site.


What years have you not been credited with in the last 10 years or so.


Is January 2020 your state pension age or did you reach that some time ago and did not claim your state pension at the time.

TriathNanEilean

Audaxer wrote: »

I'll just been looking into this for my wife. As she is now working part-time on a self-employed basis, and will be earning less than £6,345 pa, she qualifies for Class 2 Voluntary Contributions at £3 per week. But the website says it is best to pay it through part of her Self Assessment Tax Bill.

That's what I read and tried for two years. But, as I mentioned above, the SA process wouldn't let me (and didn't say why).


But I've just come across a recent thread here (post #8) that explains that. It seems that the SA part of HMRC and the NI people don't share information very well and you need to register with the latter before being able to pay Class 2 via SA.

snowgo

drumtochty wrote: »

Advise what the figure is you have "earned as pension to date" and advise exactly the figure advised as the maximium you can recieve.

How many years contributions have been credited with in total and what is the contracted out deduction as advised on the site.

What years have you not been credited with in the last 10 years or so.

Is January 2020 your state pension age or did you reach that some time ago and did not claim your state pension at the time.

The pension forecast site tells me that my forecast amount is £142.01 and that this is the maximum that I can get. I have 43 years full NI contributions. The COPE amount is £106.14 The only recent year that is showing as not complete for NI contributions is 2018-19. Other than that I have only 4 years that weren't credited with full contributions and these are all pre-1980.

I fully understand why 2018-19 NI year is showing as incomplete as I pay my NI together with my self assessment tax and that is due on 31 January 2020. But my retirement date is 6 January 2020 - my state pension age. So I will effectively draw state pension before the 2018-19 NI payment is due for payment. What puzzles me is that it states that the forecast amount of £142.01 is the maximum I can receive. I don't know if this includes the 2018-19 NI contribution - are they assuming that I will pay it on 31 January 2020? Or will they revise the amount once I have paid the 2018-19 contribution? Or, worst option of all, do I pay the 2018-19 NI class 2 contribution and get nothing for it?

drumtochty

snowgo wrote: »

The pension forecast site tells me that my forecast amount is £142.01 and that this is the maximum that I can get. I have 43 years full NI contributions. The COPE amount is £106.14 The only recent year that is showing as not complete for NI contributions is 2018-19. Other than that I have only 4 years that weren't credited with full contributions and these are all pre-1980.

I fully understand why 2018-19 NI year is showing as incomplete as I pay my NI together with my self assessment tax and that is due on 31 January 2020. But my retirement date is 6 January 2020 - my state pension age. So I will effectively draw state pension before the 2018-19 NI payment is due for payment. What puzzles me is that it states that the forecast amount of £142.01 is the maximum I can receive. I don't know if this includes the 2018-19 NI contribution - are they assuming that I will pay it on 31 January 2020? Or will they revise the amount once I have paid the 2018-19 contribution? Or, worst option of all, do I pay the 2018-19 NI class 2 contribution and get nothing for it?

You can pay NI until the tax year before the tax year in which you reach your state pension age.


From what you have said above you reach state pension age in tax year 2019 2020, the last year you can contribute NI is 2018 2019 and your info is that this is a year in which you can contribute therefore that makes sence.


It also makes sence that the transaction that takes the money from HMRC to the NI account is January 2020 and that has not happened yet.


You also appear to have been contracted out for over 25 years.


It makes little sence that you are at the maximium with a pension year still to be possibly credited to you when your forecast is only £142.00 a week, no they have not included the 18/19 credit as that is only calculated when it is in the pot, not when it may well be paid.


My good lady who had a state retirement date of June 2019 and she had a forecasts of £167.80 a week but a maximum of £168.60 a week. Like yourself that final year NI payment will not be credited until Jan 2020 and we then expect a small increase of £0.80 per week in her state pension and a catchup payment of £30 or so.


I can only suggest that there is a mistake in you forecast and I would phone the future pensions centre dead on 8:00 am in the morning as it then gets busy to get them to explain why paying the 18/19 year NI contribution will not increase your state pension.


Good Luck with that!

drumtochty

Audaxer wrote: »

I'll just been looking into this for my wife. As she is now working part-time on a self-employed basis, and will be earning less than £6,345 pa, she qualifies for Class 2 Voluntary Contributions at £3 per week. But the website says it is best to pay it through part of her Self Assessment Tax Bill.

This is a bit of an issue and it is difficult to talk to someone in HMRC on the phone that has got to that page in the book.


Let us take this tax year as an example 2019 2020.


You must register as self employed on the HMRC website by October 2019.


You must keep a note of your self employed business name that you used say " Jones Dog Walking Services"



In April 2020 you can fill in your self assestment tax return and add the self employment page.


On the self employmnent page put in your "self employment business name" and any earnings say £150. No tax to pay unless you declare £1,000 on that page.


It will advise you have no NI to pay but you can voluntarily pay Class 2 NI. You click yes here.


In most cases the system does not work and it will not allow this. this has been the case for the last two tax years.


You complete your Tax Return and send it on its online way with it not allowing you to do voluntary Class " contibutions.


You then phone the HMRC Self Assesment help line and explain the problem.


In most cases the person you talk to will not understand what you are telling them and the person on the HMRC end will advise you to talk to the Department of Works and Pensions.


This is wrong but do what you are told.


Phone the DWP and they are used to this and they will put you through to a more useful person at HMRC. The HMRC better person with your permission will get your tax return to say yes to paying voluntary Class 2 NI contributions and that will add say £150 to what you owe to HMRC via self assessment.


Give it a few days and go on to your personal tax account and by magic the amount you have to pay HMRC will then be advised and this will include the Class 2 NI contribution of say £150 or so.


You must register as self employed by October of that tax year.

moo121

Does anyone here know about paying part year class 2 contributions?

For example, if I register now for self assessment part way through this tax year and opt to pay class 2, can I voluntarily pay class 2 for the whole year? Or would I have to use class 3 to make up the complete year?

I'm just wondering if it's worth paying or not....