NI contributions and catch up
#46
Re: NI contributions and catch up
I fail to understand how anyone can rationalise not paying £100 (or so) per year for Class II's. We pay much more than that for regular pension, car insurance, home insurance, health insurance, etc., and none of these (IMO) is anywhere near as good a value.
Even if you think pension will be means-tested, it's worth a punt. That's like saying I resent spending £500 on car insurance because I may never have an accident. Look at it as something that you might need and will likely get, and at the price of a cup of coffee a week, why quibble over the cost?
Even if you think pension will be means-tested, it's worth a punt. That's like saying I resent spending £500 on car insurance because I may never have an accident. Look at it as something that you might need and will likely get, and at the price of a cup of coffee a week, why quibble over the cost?
#47
Re: NI contributions and catch up
If you have a terminal disease the extra 5 years of payments might not be a good idea, but the average healthy individual would be a fool to pass up the chance to pay the extra Class 2 NI to have the possibility of getting the new pension. It's a bet with good odds and a fantastic payout.
#48
Re: NI contributions and catch up
Class III may be three years - and life expectancy is way beyond that. If you don't make it all back, you won't care anyway because you'll be dead.
[ETA, calculations below]
Cost of Class II is £143/yr (from HMRC Web site)
Cost of Class III is £180.70 per quarter, or £722.80/yr (from HMRC Web site)
Additional pension per additional year is 1/35 of flate rate pension of £144/wk (£7,488/yr), so £213.94. In order to make back what you have paid in additional NICs, it would take:
Class II - 0.67 years, or 8 months
Class III - 3.38 years or 3 years and 4.6 months
(these figures are slightly different than last time I went through these calculations so I am not sure which of the figures has/have changed. Last time it came out as 7 point something months to make back Class II)
Last edited by dunroving; May 4th 2014 at 12:18 pm.
#49
Re: NI contributions and catch up
In the UK currently, the life expectancy of a man at 65 is 18 years; i.e. he will live to 83. So, unless you have a life limiting condition, you don't have to feel lucky, you just have to feel average.
#50
Re: NI contributions and catch up
My apologies to you and Nun. My attempt at humour was obviously a resounding failure. More emoticons needed???
#51
Re: NI contributions and catch up
requote from my post from yesterday, yes 3 years is based on Class 3, which is what I have been paying as I am not qualified for Class 2
Don't be too hasty in deciding not to do this. If you qualify for Class 2 voluntary NI contributions (but this depends on your status when you left UK and if you are working overseas or not) then the cost to you is £2.75 per week, if not then it's Class 3 which costs £13.90 per week. The cost to pay 5 years of Class 2 is £715, and for Class 3 is £3,614. But if you would be getting about £1,250 (16.6%) per year extra because you bought those extra years (based on the £144 per week proposal), you will quickly get your money back (i.e. within three years max). Although some will not benefit from index linking depending on where they live.
#52
Re: NI contributions and catch up
As others have said, even Class III doesn't take a lot of luck, as most people live more than 3 years post-retiremenet. However, many people may not be able to afford to pay Class III's.
#53
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,540
Re: NI contributions and catch up
Ah, OK, the reason I was confused was because you were responding to my post #45, which was all about Class II.
As others have said, even Class III doesn't take a lot of luck, as most people live more than 3 years post-retiremenet. However, many people may not be able to afford to pay Class III's.
As others have said, even Class III doesn't take a lot of luck, as most people live more than 3 years post-retiremenet. However, many people may not be able to afford to pay Class III's.
Along the same lines, the British state pension rewards pensioners by a 10.5% increase for each year they delay claiming. Surely somewhere in the 5% range would be more realistic, since the life expectancy of a 65 year old in close to 20 years, I believe.
#54
Re: NI contributions and catch up
I don't get the logic behind the British pension in this respect. The actuarial logic, I guess ... The Class II NIC seems too cheap. Unless loads of people die before collecting, or die after only collecting for a couple of years, then the system must be giving out millions of unfunded pounds ech year.
Along the same lines, the British state pension rewards pensioners by a 10.5% increase for each year they delay claiming. Surely somewhere in the 5% range would be more realistic, since the life expectancy of a 65 year old in close to 20 years, I believe.
Along the same lines, the British state pension rewards pensioners by a 10.5% increase for each year they delay claiming. Surely somewhere in the 5% range would be more realistic, since the life expectancy of a 65 year old in close to 20 years, I believe.
At the moment the 10.4% does look too good to be true, particularly since it is without time-limit -- e.g. you could put off claiming for ten years and get your pension doubled. For a woman like myself, who reaches state retirement age at 62, that might actually be worthwhile.
The explanation has to be that it was introduced when interest rates were higher, and government was anxious to solve the pensions crisis, so giving a good incentive to defer retirement seemed worthwhile. The odd thing is that take-up has been very low.
#55
Re: NI contributions and catch up
I would not want state pension as my only retirement income, but you'd be a fool not to pay Class 2 NICs as they are such good value for money.
IMHO a state pension is still a vital component of retirement income. It provides steady, inflation linked income and its a nice complement to any other retirement funds you have.
IMHO a state pension is still a vital component of retirement income. It provides steady, inflation linked income and its a nice complement to any other retirement funds you have.
I paid several years of class 2 a few years ago, makes me wonder it it was a waste of money.
#56
Re: NI contributions and catch up
Do you think that there will still be a State pension for those who also have a private one? I can see in 10-20 years time that the State pension will become means-tested and that anyone who has a private pension or alternative income will have their State pension reduced or stopped entirely.
I paid several years of class 2 a few years ago, makes me wonder it it was a waste of money.
I paid several years of class 2 a few years ago, makes me wonder it it was a waste of money.
Of course anything can happen, but I don't think there is any reason to be so pessimistic. There are good reasons, political and economic, for UK governments to want to keep a reasonable level of non-means tested pension, and the reform currently going through parliament -- the single tier pension -- is supposed to be a long term reform.
#57
Re: NI contributions and catch up
That would actually be an abolition of the state pension altogether, since a means tested benefit would be more akin to the pension credit benefit we have now.
Of course anything can happen, but I don't think there is any reason to be so pessimistic. There are good reasons, political and economic, for UK governments to want to keep a reasonable level of non-means tested pension, and the reform currently going through parliament -- the single tier pension -- is supposed to be a long term reform.
Of course anything can happen, but I don't think there is any reason to be so pessimistic. There are good reasons, political and economic, for UK governments to want to keep a reasonable level of non-means tested pension, and the reform currently going through parliament -- the single tier pension -- is supposed to be a long term reform.
#58
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,540
Re: NI contributions and catch up
I think all kinds of catastrophic things might happen. Extreme climate change, hyperinflation, nuclear war etc. but that a government like the UK or the US would renege on its responsibility to pensioners who've paid their contributions over the years is unlikely. Sure, they'll tweak it, increasing the age etc., but simply abolishing it is not something I worry about.
#59
Re: NI contributions and catch up
I think all kinds of catastrophic things might happen. Extreme climate change, hyperinflation, nuclear war etc. but that a government like the UK or the US would renege on its responsibility to pensioners who've paid their contributions over the years is unlikely. Sure, they'll tweak it, increasing the age etc., but simply abolishing it is not something I worry about.