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Advice -Confused on topping up Pension, Class 2 or 3? Sole Trader? How many years??

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stylus360
stylus360 Posts: 448 Forumite
Part of the Furniture 100 Posts Name Dropper Combo Breaker
edited 16 June 2023 at 8:00AM in Topping up your state pension
Hi all

Can anyone advise on my State Pension and if i am Class 2 or 3?

I finished full time employment in 2014 after starting in 1991 (23 years) and NI was paid automatically and showed on my payslip.

I have since since had income from rental properties only and was told/informed that i would be a 'Class 3' Sole Trader, i am still in the standard 20% tax bracket and use an accountant for income/repairs receipts etc

I have logged in to my State pension account today and it showed as-

You can get your State Pension on 22 December 2040

Your forecast is £203.85 a week, £886.38 a month, £10,636.60 a year


You need to continue to contribute National Insurance to reach your forecast

Estimate based on your National Insurance record up to 5 April 2022

£144.46 a week

Forecast if you contribute another 11 years before 5 April 2040

£203.85 a week

£203.85 is the most you can get

_________________________________________________________________________________________________________________


I am confused as it states i need to contribute another 11 YEARS  -(Forecast if you contribute another 11 years before 5 April 2040).

When i click on View your National Insurance record - 

I get You have:
  • 27 years of full contributions
  • 18 years to contribute before 5 April 2040
  • 6 years when you did not contribute enough

I looked at the years i did not pay, plus rang the 'Help[line' and they presumed i should only be paying Class 2 ???? (much les to pay/£100 odd )

I have already made x2 payments of £824.20 to 'fill the gaps' as Class 3, he HMRC Helpline stated i should be Class 2 ??

Also if i have 27 years of FULL contributions why does it state i need contribute another 11 years before 5 April 2040.

That takes me to 38 years of contributions? I presumed 35 was enough??

All future years i click on from state -'You can make up the shortfall

Pay a voluntary contribution of £824.20 by 5 April 2024. This shortfall may increase after 31 July 2023.'


Anyone help as the 'Advice Line' could not answer my questions/make sense to me...


Cheers







«1

Comments

  • Marcon
    Marcon Posts: 14,511 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Have asked board guide to move to new board for State pension top up/queries on NI, where you'll get an answer from someone whose specialist area this is!
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • molerat
    molerat Posts: 34,621 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    That takes me to 38 years of contributions? I presumed 35 was enough??

    35 years is only for those born this century.  Everyone else is on a hybrid scheme.

    You have missed out the bit on your forecast where you were contracted out and links to a COPE amount. That will be the reason for needing more than 35 years.

    Whether a landlord is a gainful self employment or an investment which decides the class 2 or 3 question is one for others to comment but a good start would be to read here https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim23800



  • stylus360
    stylus360 Posts: 448 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    molerat said:
    That takes me to 38 years of contributions? I presumed 35 was enough??

    35 years is only for those born this century.  Everyone else is on a hybrid scheme.

    You have missed out the bit on your forecast where you were contracted out and links to a COPE amount. That will be the reason for needing more than 35 years.

    Whether a landlord is a gainful self employment or an investment which decides the class 2 or 3 question is one for others to comment but a good start would be to read here https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim23800



    There is no mention of COPE when i log in, plus the advisor on the helpline did not mention it, how do i find out about it?
  • stylus360 said:
    molerat said:
    That takes me to 38 years of contributions? I presumed 35 was enough??

    35 years is only for those born this century.  Everyone else is on a hybrid scheme.

    You have missed out the bit on your forecast where you were contracted out and links to a COPE amount. That will be the reason for needing more than 35 years.

    Whether a landlord is a gainful self employment or an investment which decides the class 2 or 3 question is one for others to comment but a good start would be to read here https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim23800



    There is no mention of COPE when i log in, plus the advisor on the helpline did not mention it, how do i find out about it?
    Have you read all the way down to the bottom of your forecast 🤔.

    There would be a bit worded like this,

    You’ve been in a contracted-out pension scheme
    Like most people, you were contracted out of part of the State Pension.
  • stylus360
    stylus360 Posts: 448 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    edited 19 June 2023 at 10:25PM
    Yes it has!, my NI through employment ended in 2014.

    I was under the impression i still had to 'pay' to make up my years to gain a full state pension?

    This has now got even more confusing tbh, but looking back at the amount i paid whilst fully employed i have been paying as 'Class 3' as a quarter of that amount.

    It States@

    Contracted Out Pension Equivalent (COPE)

    Your COPE estimate is £46.02 a week

    This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.

    In most cases the private pension scheme you were contracted out to:

    • will include an amount equal to the COPE amount
    • may not individually identify the COPE amount

    The total amount of pension paid by your workplace or personal pension schemes will depend on the scheme and on any investment choices.'


    As above my private pension scheme needed and i pay into (plus have an IFA and A Fund Manager -costs 1.5% of my TOTAL pension fund), so do does this private iSIPP i transferred to contribute to my state monies??

    So Confused tbh and y IFA who takes 0.5% of my pot (after 24 private pension) would not just stated yes i should keep paying for my state pension???


    Thanks

  • molerat
    molerat Posts: 34,621 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    You are over complicating things.  You need another 11 years to reach the maximum.  10 will take you to £202.70 and the 11th adding the final £1.15.
    Your IFA is correct, you should continue contributing.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,636 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 20 June 2023 at 9:46AM
    stylus360 said:
    Yes it has!, my NI through employment ended in 2014.

    I was under the impression i still had to 'pay' to make up my years to gain a full state pension?

    This has now got even more confusing tbh, but looking back at the amount i paid whilst fully employed i have been paying as 'Class 3' as a quarter of that amount.

    It States@

    Contracted Out Pension Equivalent (COPE)

    Your COPE estimate is £46.02 a week

    This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.

    In most cases the private pension scheme you were contracted out to:

    • will include an amount equal to the COPE amount
    • may not individually identify the COPE amount

    The total amount of pension paid by your workplace or personal pension schemes will depend on the scheme and on any investment choices.'


    As above my private pension scheme needed and i pay into (plus have an IFA and A Fund Manager -costs 1.5% of my TOTAL pension fund), so do does this private iSIPP i transferred to contribute to my state monies??

    So Confused tbh and y IFA who takes 0.5% of my pot (after 24 private pension) would not just stated yes i should keep paying for my state pension???


    Thanks


    You do need to add another 11 years however as you have 17 future years making voluntary contribution for earlier years may not be necessary.

    Having or contributing to a personal pension now will not add NI years.

    Also, if you end up paying voluntary NI you should think carefully about the 11th year.

    The first 10 post 2016 years will add £58.24, taking you to £202.70.  The final year will only add the remaining £1.15 so not nearly as good value if you were having to fork out £800-900.
  • stylus360
    stylus360 Posts: 448 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    So i need to add 10 years @ £800 (approx) =£8000 before the deadline of 2025 ?

    The 11th year is pointless as stated above...

    Thanks guys.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 17,636 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 25 July 2023 at 7:42AM
    What about the next 17 years though? 

    If you expect to be adding future years that will reduce the number of prior years you need to pay for.

    You can get your State Pension on 22 December 2040


  • stylus360
    stylus360 Posts: 448 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    So confusing, i was told i had to make up voluntary contributions by 2025?

    I have just logged in and my £824.20 has increased my pension by £5.21...lol

    My pension is now £149.67 a week.

    I would take approx 3 years 2 weeks break even.
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