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  • FIRST POST
    • ying_yang
    • By ying_yang 14th Mar 18, 10:44 PM
    • 3Posts
    • 0Thanks
    ying_yang
    Voluntary National Insurance - Yes or No?
    • #1
    • 14th Mar 18, 10:44 PM
    Voluntary National Insurance - Yes or No? 14th Mar 18 at 10:44 PM
    Hi everyone,

    I am currently early thirties and have been working outside the U.K for around five years. I could possibly be returning in around ten years or potentially not at all. I am struggling to decide whether I should make voluntary NI contributions in my absence. It seems the main uncertainty is exactly what the pension will look like in 40 years when it comes to retirement. The contribution I believe is around 2xx GBP annually, which is not too much and I am still thinking it may be worth a gamble? Has anybody else analysed this situation?
Page 1
    • shortcrust
    • By shortcrust 14th Mar 18, 11:02 PM
    • 1,874 Posts
    • 2,730 Thanks
    shortcrust
    • #2
    • 14th Mar 18, 11:02 PM
    • #2
    • 14th Mar 18, 11:02 PM
    No one knows what will happen, but I'd personally prefer to be 68 (or 70 or 75!!) and thinking I'd wasted a few hundred quid in my 30s than 68 and wishing I'd got a full set of NI years behind me.
    • badmemory
    • By badmemory 15th Mar 18, 1:59 AM
    • 1,603 Posts
    • 2,108 Thanks
    badmemory
    • #3
    • 15th Mar 18, 1:59 AM
    • #3
    • 15th Mar 18, 1:59 AM
    If you look at SPs logically the main conclusion is that the way to upset the majority of voters would be to make the SP means tested. Unless the voting pattern in this country changes older people tend to vote more than younger. This is why they still haven't removed the triple lock. So with that in mind:-

    If you keep your eye on the state pension age, we'll call it 68 for convenience. So you get to 40 & you have 10 years in the NI "bank" & you need 35 = do nothing as you've 28 yrs to go and only need 25 more. Get to 45 & you only have 23 to go = buy the 2 oldest yrs you can. And recycle until 68 or when the proverbial hits the fan & then stop.

    Unfortunately (being a pessimist) with growth at 1.5% & inflation at 3% I personally expect the proverbial to hit the fan sooner rather than later.
    • Brynsam
    • By Brynsam 15th Mar 18, 9:31 AM
    • 922 Posts
    • 604 Thanks
    Brynsam
    • #4
    • 15th Mar 18, 9:31 AM
    • #4
    • 15th Mar 18, 9:31 AM
    Hi everyone,
    Has anybody else analysed this situation?
    Originally posted by ying_yang
    I don't think it is possible to 'analyse' so far in advance, in the absence of a crystal ball. If you can easily afford the contributions it might make sense, but you would have to make payments on the basis it could be money down the drain (or money well spent), but who knows?
    • pip895
    • By pip895 15th Mar 18, 12:11 PM
    • 576 Posts
    • 321 Thanks
    pip895
    • #5
    • 15th Mar 18, 12:11 PM
    • #5
    • 15th Mar 18, 12:11 PM
    I'm a little unsure on this but Class 2 is at the 2xx level - isn't that being fazed out April 2019? If you have to pay Class 3 I think you might be looking at 7xx. Might be worth grabbing the 2xx years whilst available - given the uncertainty not sure whether it would be worthwhile at the 7xx level or not - probably - if you could afford it without hardship.

    Perhaps someone could confirm?
    • Terron
    • By Terron 15th Mar 18, 3:22 PM
    • 212 Posts
    • 188 Thanks
    Terron
    • #6
    • 15th Mar 18, 3:22 PM
    • #6
    • 15th Mar 18, 3:22 PM
    I'm a little unsure on this but Class 2 is at the 2xx level - isn't that being fazed out April 2019? If you have to pay Class 3 I think you might be looking at 7xx. Might be worth grabbing the 2xx years whilst available - given the uncertainty not sure whether it would be worthwhile at the 7xx level or not - probably - if you could afford it without hardship.

    Perhaps someone could confirm?
    Originally posted by pip895
    Class 2 is less than 150 a year and is indeed ending in April 2019. After that you pay over 700 for class 3. If you qualify to make class 2 contributions it would be daft not to make them .

    As a landlord I may or may not be able to make them, but am trying. I only need 1 year to maximise my SP.
    • Johnnyboy11
    • By Johnnyboy11 16th Mar 18, 5:40 AM
    • 23 Posts
    • 20 Thanks
    Johnnyboy11
    • #7
    • 16th Mar 18, 5:40 AM
    • #7
    • 16th Mar 18, 5:40 AM
    Pay 5k in Class 2 NIs for a full state pension, or pay 300k for an equivalent annuity. Yes or No?
    • wannabe_a_mum
    • By wannabe_a_mum 16th Mar 18, 9:38 AM
    • 271 Posts
    • 226 Thanks
    wannabe_a_mum
    • #8
    • 16th Mar 18, 9:38 AM
    • #8
    • 16th Mar 18, 9:38 AM
    If you are working overseas are you contributing to the NI equivalent scheme in that country? Contributions could be transferrable if there is an appropriate agreement in place?
    • bostonerimus
    • By bostonerimus 16th Mar 18, 1:00 PM
    • 1,818 Posts
    • 1,167 Thanks
    bostonerimus
    • #9
    • 16th Mar 18, 1:00 PM
    • #9
    • 16th Mar 18, 1:00 PM
    Class 2 is less than 150 a year and is indeed ending in April 2019. After that you pay over 700 for class 3. If you qualify to make class 2 contributions it would be daft not to make them .

    As a landlord I may or may not be able to make them, but am trying. I only need 1 year to maximise my SP.
    Originally posted by Terron
    I've been a UK expat for the last 31 years and paying voluntary NICs has been the best financial decision of my life because I paid Class II which has been very inexpensive.....the current rate is 2.85 a week and it was less in the past. This very low contribution rate for expats is now being replaced with Class 3 contributions which are 14.25/week which is still a good deal and I think this is a good bet/investment in your future. When you take the SP you should try to be resident in a country where it is index linked

    I estimate that over my 35 years of contributions I've paid just 4k in NI contributions and if I'd invested that at 8.5% annual average return I'd have a pot of around 42k at age 67 when I will get the SP. I'm 57 now and I estimate the SP will be 10k/year in 10 years time when I start to take it. So if I was to take the 42k that my lifetime NI contributions might have been worth and buy a 2% annually growing annuity with an initial 10k payout, ie an annuity equivalent to the SP, and I live another 20 years, then that implies a rate of return of 25% and an initial payout rate of 25%. Or think of it like this; at 10k a year index linked it will only take me 4 years to be ahead if my 42k principal payment. That's the best annuity ever!

    I also have 20 years of contributions into the US system and my UK SP will not change my US social security pension.......so I'll get two state pensions. You should check to see how any foreign schemes you contribute to interact with the UK system.
    Last edited by bostonerimus; 16-03-2018 at 2:33 PM.
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