The National Insurance Gravy Train

Twonko · 16 September 2017 at 2:35PM

I have thirty-five years NI in the bag, so in theory, I am entitled to a full State pension. Because I opted out of SERPS for nearly all that time, I know I'm going to get the lower 'full' rate of something like £115 a week or thereabouts. However, although I have retired and taken my work pension, I still do a fair amount of contract work on which I pay a fortune in NI contributions. Does my final State pension get bumped a bit for these generous additional payments or am I just getting stiffed by HMG?
The online calculator suggests I will get a bit more but since that is wrong on just about everything else, I don't believe it.
Any informed advice welcome. Thanks in advance.

Paul_Herring · 16 September 2017 at 2:47PM

or am I just getting stiffed by HMG?

Paying national insurance doesn't just give you credits towards a state pension.

http://www.bbc.co.uk/newsbeat/article/10078062/why-do-we-pay-national-insurance

National Insurance is now used to pay for:
The NHS

Unemployment benefit

Sickness and disability allowances

The state pension [i.e. what's currently being paid to current pensioners]

Dazed_and_confused · 16 September 2017 at 2:49PM

If you look at your personal tax account (log in on gov.uk) that will show your current entitlement and how much you can build it upto by retirement age.

Be very careful that you read it properly as at first glance it might imply you are going to get £159/week but, based on your op, this will almost certainly only be true if you continue paying sufficient NI to get additional years.

Below the £159 (or whatever the maximum you can get) it will say what you have actually earned to date (probably to 05:04:2017).

I would class you as a winner with the change to State Pension, lower NI paid for many years but now with the opportunity to increase it from £120+/week to £159

xylophone · 16 September 2017 at 2:58PM

Have you obtained a state pension statement?

https://www.gov.uk/check-state-pension

Twonko · 16 September 2017 at 3:00PM

Thanks for the replies. I know why NI is paid but as a retiree, I would get those benefits anyway without any further contributions. Therefore my additional contributions are solely to my benefit only if they result in an increase in my State pension. I should make clear that I have no fundamental objection to paying more. I can afford it, but it does seem rather punitive.

As I said in my OP, the gov.uk calculator suggests my State pension will increase as a result of additional NI contributions but this is a far from reliable calculator and I do not believe it and would like to be able to calculate my own figures, particularly as my employment income now is not regular.

Does anyone know what the maths are relating to additional contributions so that I can calculate my own figure?

Dazed_and_confused · 16 September 2017 at 3:12PM

Your personal tax account shows your entitlement immediately, no waiting for a paper statement or anything and no calculator involved.

If you read it correctly you will know your guaranteed amount earned so far (to 05:04:2017 probably) and how many years you can earn additional amounts.

Each additional year adds £4.55/week up to the maximum of £159 (unless your starting amount already exceeded £159 which seems unlikely from your op).

kidmugsy · 16 September 2017 at 3:18PM

Consider doing your contract work as a limited company.

jamesd · 16 September 2017 at 3:28PM

Twonko wrote: »

Because I opted out of SERPS for nearly all that time, I know I'm going to get the lower 'full' rate of something like £115 a week or thereabouts. However, although I have retired and taken my work pension, I still do a fair amount of contract work on which I pay a fortune in NI contributions. Does my final State pension get bumped a bit for these generous additional payments or am I just getting stiffed by HMG?
The online calculator suggests I will get a bit more but since that is wrong on just about everything else, I don't believe it.

Believe it.

A foundation amount was calculated for everyone as of April 2016. For a person who was contracted out all the time that would be about £120-125 because the S2P system added small amounts of earnings-related extra even for people who were contracted out.

For years starting from April 2016 that count, your state pension will be increased by 1/35th of the full flat rate until you reach that level. So 1/35th of £159.95 a year extra for life at the moment, with triple lock as long as that lasts.

The flat rate system is an excellent deal for people who were contracted out a lot and who are still able to get more years from April 2016. The ones who didn't contract out are already at the cap but the ones who did get their private pension and also still the chance to increase their state pension.

Twonko · 16 September 2017 at 3:31PM

Thanks Dazed. That kind of gets me to where I want to be. At least I can get a rough projection. It seems you don't have to earn much to get a full years NI contribution.

And I would love to operate as a Limited Company but the tax man no longer likes such things since earlier this year. Now I can either work as an employee (my preferred option) or through an umbrella group, which does have certain advantages, but also means that I am liable for both the employers and employees NI contributions. It ain't nearly so good as it used to be.

Twonko · 16 September 2017 at 3:36PM

Thanks also James. That is helpful.

msallen · 16 September 2017 at 3:42PM

Twonko wrote: »

It ain't nearly so good as it used to be.

You mean you aren't able to stiff HMG any more. Disgraceful.

The National Insurance Gravy Train

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