NI contributions after the age of 60 (male)

hansi

I have paid in the required 44 years contributions, and although I am still working, I still have to pay the contributions but I understand that this will not make any difference to the pension I receive at 65. In other words this money after 60 just goes to the Treasury and disappears down a black hole? Is this righ?, can I claim back any contributions after 60 or will my pension be enhanced?

CIS

Your basic state pension wont be enhanced past 44 yrs, the reason they are paid is that the law states that if there is a liability to pay before state pension age, NI conts must be paid. You will however continue to accrue any State Second Pension you are entiled to by virtue of your earnings

If you where to give up work before 65(and not be registered SE or outside of the country for more than 6 months in a tax yr) your record will be protected by automatic credits for each full tax yr between 60 & 65 that you meet these criteria, so if you are staying in work just to boost your basic state pension theres no need to.
(automatic credits dont give any help towards state second pension).

hansi

Thank you for that. I am actually retiring at the end of July. If I read you right then all the NI contributions I have made since hitting 60 will accure towards my Second State Pension. Right?

CIS

yeah thats right unless your contracted out in which case you'll earn next to no state second pension or your self employed in which case you'll not accrue state second pension.

Debt_Free_Chick

hansi wrote:

Thank you for that. I am actually retiring at the end of July. If I read you right then all the NI contributions I have made since hitting 60 will accure towards my Second State Pension. Right?

mmmmm not quite. Your State Second Pension is based on earnings above the Lower Earnings Limit. So you will only be getting more S2P if you've earned enough.

NI is just tax. Although the NI you pay is used to calculate your Basic State Pension, NI are not "pension savings" as such.

The NI that would have been used to calculate your basic state pension (before you reached 44 years) do not go towards giving you an extra S2P. So your original thought is right ... you are paying NI for no increase in your basic state pension. Those NI are not being transferred to increase your S2P.

This looks rather muddled - let me know if I've not been clear.

hansi

In that case, could I make a claim for having those extra contributions from age 60 refunded? They can't have it both ways, can they? (they probably can lol)

Milarky

Debt_Free_Chick wrote:

mmmmm not quite. Your State Second Pension is based on earnings above the Lower Earnings Limit. So you will only be getting more S2P if you've earned enough.

NI is just tax. Although the NI you pay is used to calculate your Basic State Pension, NI are not "pension savings" as such.

The NI that would have been used to calculate your basic state pension (before you reached 44 years) do not go towards giving you an extra S2P. So your original thought is right ... you are paying NI for no increase in your basic state pension. Those NI are not being transferred to increase your S2P.

This looks rather muddled - let me know if I've not been clear.

Since NI does not start to be taken until the earner is already above the lower earnings limit [LEL] - at least the PAYE earner - it is technically the case that all NI paid counts towards S2P these days. So any additional NI paid after tha age of 60 is securing additional pension benefit, albeit not in respect of basic pension. Of course to get to that stage [i.e. at least the LEL] you need to have used up your most of your personal tax allowance [PA] for the year via earnings first. If you have non-earned income, therefore, you pay additional marginal tax on this [at least that's one way of looking at it]

For example:
1)Aged 60 not working unearned income of 4895 [equals PA] Threfore no tax. Age 60+ credits received.
2)Aged 60 earning 4264 [the LEL] plus 4895 additional earned income. No tax on the earnings AND no NI actually paid [as it starts from this level only] BUT 20% tax [say] on unearned income. Of this £126.20 is refunded [20% x [4895 - 4264]] later, so net tax is £825.80 [20% x 4264]..

What you get:
By earning £4264, you have turned a year [post 60] into a qualifying year for S2P purposes - just by reaching that level. The system treats you as though you earned £11,600 - the 'earnings threshold' [ET] however, and credits you with about £1.13 pw additional pension at age 65. Unlike the basic pension, this addition is indexed to earnings before payment - so you would get 4 years at [say] 1.5%pa 'real' growth in the figure - to about £1.20pw compared with a basic state pension of £82 pw. To get this you've had to pay additional tax of £825. This takes no account of the effects of means-testing [i.e. to reduce the real benefit] post 65 but does suggest there is some kind of quantifiable 'trade off' between working 60-65 and refraining from working and giving up income

Justin_Credit

I believe that for a male past the age of 60 there is a reduction in the rate of N.I. contributions, I'm sure I've read it somewhere. Worth contacting Newcastle to find out exactly what you should be paying, and while you're at it it's worth requesting a pension forecast.

Hope this helps.

JC

CIS

there is no reduction in NI after 60 for employed men, the only reduction is at 65 when it is reduced to zero percent on earnings, and I believe also cessation of class 4 NI as well as the class 2 that ceases at 65 as well.

Midas

hansi wrote:

. In other words this money after 60 just goes to the Treasury and disappears down a black hole?

Much like the money of the 44 years before you were sixty... :rolleyes:

Debt_Free_Chick

Milarky wrote:

Since NI does not start to be taken until the earner is already above the lower earnings limit [LEL] - at least the PAYE earner - it is technically the case that all NI paid counts towards S2P these days. So any additional NI paid after tha age of 60 is securing additional pension benefit, albeit not in respect of basic pension.

I agree. But by stating that all your NI go towards S2P, does not increase the amount of S2P you actually get. The amount you get is EARNINGS related - not related to the NI you pay.

I think we're agreeing, but just so the OP is clear .. any NI that do not count towards your basic state pension (cos you've already accrued the maximum years) do not get carried forward to buy you more S2P. It's just tax