Gaps in NI, should I pay?

akira181

I'm currently 38, have 12 years NI in full, and around 10 years in gaps.

2003 to 2007, I was a full time student so got gaps there. I worked part time and 03 to 05 are complete, 05 to 07 are not for some reason. Oct 2008 to Sept 2014 I was working in Germany. 

Assuming I work to 67 and they don't move the goalposts again in the next 30 or so years, it's probably not worth it to pay up 2009-2015 as I got 29 years to get the missing 23 years.

Ideally, I'd like to retire around 60 if I'm lucky enough to have that opportunity, meaning I'd have 22 years of working left. If I'm preparing for that possibility, it's probably worthwhile to pay up 2007 to 2008, but what about 2008 to 2009? 

Any advice would be greatly appreciated!

molerat

What exactly does your forecast show ?  How many more years does it state you need ?  You may likely need another 23 years with 22 left to go till 60 so it looks unlikely you need to top up now.  Put the money away now to buy top ups at the other end if needed.

akira181

My forecast says I need to contribute another 23 years before 2054 to get the full state pension.

If I want to retire at 60, that's 2046, giving me 22 years. Although 60/61 isn't really worth splitting hairs over I guess.

How does a top up at the other end work?  If I were to do that, would it not be better to get 07/08 while I still can for under £200 now rather than top up over £800 at the other end or am I not understanding the process?

molerat

£200 is cheaper than £800 but still more expensive than £0 which is the additional cost if you carry on working.  That is the choice you have to make, neither decision is right or wrong.  You may also be eligible to pay class 2 for those years you were in Germany at around £170.

pinnks

Have you done a "Kontenklärung" in Germany to have your post-17 pre-working education (and any subsequent re-training periods when not working) added to your German record?  These will give you additional qualifying periods (Wartezeit) and may, or may not, also give you earnings points (akin to NI credits) but that depends on what the education was, e.g. university or technical college etc.

When you ask for your Kontenklärung, be sure to inform the DRV Bund (you will now be dealt with from DRV Bund in Berlin), ask them to also take account of your UK record and they will build that in (akin to doing the aggregation and pro-rata pension calculations when you finally claim your pension.  And remember, you should be able to claim your pension (actuarially reduced) at 63 so long as you have at least 35 years of Wartezeit across the UK and Germany.

Finally, you may find that your UK NI (mandatory, or voluntary) actually increase your German pension when the aggregation calculations are done...  This can be 10% or more.

akira181

molerat said:

£200 is cheaper than £800 but still more expensive than £0 which is the additional cost if you carry on working.  That is the choice you have to make, neither decision is right or wrong.  You may also be eligible to pay class 2 for those years you were in Germany at around £170.

I see. I've filled in the CF-83 form to see if I can get those germany years recalculated and I'll have a think. Odds are I won't need it as I probably won't be able to get/afford early retirement at 60 and I've still got enough time to get the qualifying years.

pinnks said:

Have you done a "Kontenklärung" in Germany to have your post-17 pre-working education (and any subsequent re-training periods when not working) added to your German record?  These will give you additional qualifying periods (Wartezeit) and may, or may not, also give you earnings points (akin to NI credits) but that depends on what the education was, e.g. university or technical college etc.

When you ask for your Kontenklärung, be sure to inform the DRV Bund (you will now be dealt with from DRV Bund in Berlin), ask them to also take account of your UK record and they will build that in (akin to doing the aggregation and pro-rata pension calculations when you finally claim your pension.  And remember, you should be able to claim your pension (actuarially reduced) at 63 so long as you have at least 35 years of Wartezeit across the UK and Germany.

Finally, you may find that your UK NI (mandatory, or voluntary) actually increase your German pension when the aggregation calculations are done...  This can be 10% or more.

I have no idea about the German tax/pension system, it's completely confusing to me. I don't believe a Kontenklarung applies as I studied in the UK (mechatronic engineering) and moved to Germany for work about a year after graduation?

I worked for a little over 4 years, got made redundant and was on Arbeitslosengeld for 8ish months, then decided to go backbacking before moving back to the UK. All this was pre-Brexit.

Since you've got a better handle on the German system than I do, is there anything I should be looking into?

pinnks

The fact that this was all pre-Brexit means you are covered by the EU Withdrawal Agreement, so everything continues in this regard as if the UK were still in the EU. 

The German system is earnings-related as well as time-related, based on qualifying months, where 1 day of qualifying activity in month, makes the month "full".  You can claim your pension (including under the EU rules that would include your UK contribution record converted, by Germany, to months) with 5 qualifying years at normal pension age (broadly the same as in the UK, so rising to 67), at 63 (reduced by 0.3% for each month it is taken early) with 35 years, or 2 years before normal pension age (not reduced) with 45 years.  If you are no longer resident and able to contribute, then my view is that taking the reduced amount at 63 is a good decision but you would want to do the maths for yourself when the time comes...  4 years at 86% compared to 4 years at 0€, followed by the rest of your life at 86% or 100%...

Your earnings points (Entgeltpunkte) are awarded annually based on a comparison of your earnings in that calendar year to the statistical average earnings.  If you earned the average you get 1 point; earn less you get less than 1 point and earn more you get more that 1 point, up to (I think) 2 points for those on very high earnings (100,000€ plus, perhaps).  Each point gives you 37.60€ per month, and increases each July in line (broadly) with earnings.  From July this year it rises to 39.32€ per point per month.

When you claim your pension it is broadly, Entgeltpunkte x € per point per month (reduced by about 14% if you take it at 63).

Germany has a system of credits akin to NI Credits in the UK.  Some give you Wartezeit, so count towards your 5, 35 or 45 years, while some give you Entgeltpunkte, so yield real money.  Some give both.  For instance, if you are on a low wage under the age of 25, then you get extra Entgeltpunkte. 

If you spent time in post-17 education, whether in Germany or elsewhere and irrespective of when you took up German residence, you get Wartezeit and may get Entgeltpunkte depending on the institution at which you studied and what you studied.  In simple terms purely academic studies like uni give Wartezeit only, while more applied courses like in a technical college or similar can also give Entgeltpunkte.

So, at the moment you will have 4, or so, years (48+ months) of Wartezeit and that could increase if they check your post-17 education record.  You will also have a number of Entgeltpunkte related to those 48+ months and that too could increase compared to your actual salary in those years, because of your level of earnings under the age of 25 as well as for your period of education in the UK.  It is, what it is, but if you don't go through the process now, you will need to do it when you claim your pension, by which time it will be much more difficult if school/uni etc records have been destroyed.

Somewhere you will have a Versicherungsnummber (pension insurance number) in the format  99 112299 X 123. If you have lost it, DRV are happy to work with you to discover it (a friend had lost everything from their time in Germany for reasons beyond their control but was able to find their number in correspondence with DRV and now has their pension).

Insurance | Deutsche Rentenversicherung (deutsche-rentenversicherung.de)

As a Brit with a German record, your DRV office will be:

Deutsche Rentenversicherung Bund
Ruhrstraße 2
D-10704
Berlin
Germany

The above website has some stuff in English but not all of the detail you might want, so look at the German site too and use a translator if necessary.

I would contact DRV Bund and explain that you are seeking to get your German "pension house" in order and ask for a Kontenklärung.  What this does is cause the DRV to check that your German record is complete for all years (months) to the date of that exercise.  If they know that you have non-German, EU/UK periods in this case, they will contact DWP for your records in the same way they would if you were claiming your German pension. The will also ask for proof of your education periods, so copies of certificates or letters from the institutions saying you were a student from then until then and so on.  This can also apply for re-training periods in later life, also unrelated to where you were resident at that time.

You end up with a confirmed and agreed contiguous record from the year in which you turned 16 (when your UK record started), until the date of the Kontenklärung.  You get a number of printouts (about 7 or 8mm thick), showing everything from the outcome of the Kontenklärung, to a pension forecast (Rentenauskunft) based on your German periods only (innerstaatliche Berechnung) and on your aggregated periods under EU law (zwischenstaatliche Berechnung), plus loads of calculations that you will struggle to fathom but which set out in great detail how all of the numbers hang together.  It also shows the comparison of those two calculations where you can see to what extent the EU rules benefit you.  For me they were both identical (school, uni, work in German, work in UK, retire) but I have seen the EU calculation give nearly 20% more to a person with a more chequered work/non-work history spread across their time in both countries.  Again, it is, what it is, but the EU rules can (perhaps unusually across the various EU systems) give rise to a higher pension than one might expect.  I think this is related to how Germany awards those credits and how that impacts on the second calculation I mentioned above.

Tax is a whole other issue but in simple terms, your tax office will be the specialist office that deals with all non-residents in receipt of a German pension.  

Finanzamt Neubrandenburg (RiA)
Postfach 110140
17041 Neubrandenburg
Telephone: +49 395 44222 – 47000
e-mail ria@finanzamt-neubrandenburg.de
Rente im Ausland (finanzamt-rente-im-ausland.de)

Again, that website has quite a good English section, especially the forms, but the German pages are, understandably, more comprehensive.

Under the Double Taxation Agreement, your German state pension is taxable only in Germany, so does not feature at all on your UK self assessment.  Given that the German taxation of their pension changed in 2005, you get a proportion of your pension tax free (too complicated for this note) but the rest is taxed without any personal or other allowances other than a default tax-free amount of 102€ that every pensioner gets.  You can elect for the tax office to assess you absent submitting tax returns (highly recommend) and pay by direct debit (also recommend). 

I am sure the above will boggle your mind but do come back with further questions once you have digested it all.