rachyp

I have been in the ME for nearly 4 years now. Someone mentioned about paying Ni coontributions.
Can anyone help me with what i should be paying- class 2 or class 3?

And how do I go about arranging this payment?

TIA

OriginalSunshine

don't bother - just make sure your medical insurance is valid in the UK, you have a cash lump sum stashed away in case you get made redundant, and think if you really want to wait until you are 70+ to get 100 quid a week.....?

Bob

Depends how close someone is to retirement and/or the 30 years of contributions to get a full pension.

If someone is in their 20's, it probably isn't worth it, but someone in their 40's, for the sake of a couple squid a week, it's a bit of a bargain to make the voluntary contributions.

Autonomy

These should help...

http://www.direct.gov.uk/en/MoneyTax...ngup/DG_190069

http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf

Meow

The rule of thumb is that it's probably worth continuing with NI contributions if you are likely to retire in the UK, EU, or one of the few other places where your State Pension will be indexed in payment. If this is not going to be the case, don't bother as the income will soon be devalued by the effects of inflation.

Ross Naylor

Hi Rachyp,

Your first step should be to contact the state pension forecasting team in Newcastle and ask for a pension forecast.

This will tell you the number of qualifying years that you already have as well as the level of state pension that you can currently expect.

Their telephone number is +44 191 218 3600. If you contact them, they will then send you the completed relevant form for you to sign and return to them. (Remember, as with all communications with HMRC, to have your NI number handy when you call.)

Alternatively, if you want to speed the process up, you can download the relevant form here and send it directly to them. The address to send it to is:

State Pension Forecasting Team
The Pension Service
Tyneview Park
Whitley Road
Newcastle upon Tyne
NE98 1BA
England

Allow them a few weeks to get back to you.

The next step, if you don’t already do so, is to start making regular voluntary contributions. There are 2 types of contribution that you can make, either Class 2 or Class 3.

To qualify for Class 2 Contributions, you must have been ‘ordinarily’ employed or self-employed immediately before you went abroad. (If you are in doubt as to whether you qualify, contact National Insurance Contributions – International Caseworker Team on +44 191 225 4811).

If you don’t qualify for Class 2, then you need to make Class 3 contributions.

Class 2 contributions have the following benefits:

• they count towards your State Pension when you retire
• they entitle you to the Employment and Support Allowance (previously known as Incapacity Benefit) and bereavement benefits when you return to the UK

Class 3 contributions have fewer benefits. Namely, they don’t entitle you to the Employment and Support Allowance when you return to the UK.

In addition, Class 3 contributions are more expensive. For Class 2 contributions, the payment is equivalent to GBP2.65 per week (2012/2013). Class 3 payments are equivalent to GBP13.25 per week (2012/2013)

As you can see, wherever possible, it makes sense to pay Class 2 Contributions.

To commence contributions (Class 2 or 3) you need to complete the form CF83, which can be found on the last 2 pages of the NI38 document. You can find a copy here.

Payments can be made monthly by Direct Debit or with an annual payment.

Finally, if you haven’t been making any contributions for some time and still do not have 30 qualifying years, then you can make up missed years going back for the last 6 years. Your State Pension Forecast (mentioned above) will tell you how much you need to pay to make up each of these years.

Instructions on how to make payments for these missed years will be on the forecast letter.

As you can see above there is some debate as to whether paying voluntary NICs is worthwhile. My tuppenceworth is that for just under 3 pound a week it makes sense, especially if as Meow mentions you are likely to retire in the UK, EU or one of the other jurisdictions where the pension increases in line with inflation.

mikewot

If you've made over 30 years of Class 1 payments (like me) then you don't need to make any more contributions as you've made the maximum. However that won't stop them taking money off you if they can. Because my company is UK based, but I'm locally paid, HMRC are still taking Class 1 contributions from me for the first 52 weeks overseas.

Autonomy

What is the difference between class 2 and 3 - If class 2 gives you more and is 25% of class 3 - why would you pay class 3?

Ross Naylor

Because not everyone qualifies to make class 2 contributions. To qualify for Class 2 Contributions, you must have been ‘ordinarily’ employed or self-employed immediately before you went abroad.

Autonomy

Ok - understand now. Cheers.

Millhouse

I took the view that it's not worth it. I'll be collecting my giro in 32 years time assuming:

1) I'm not dead.
2) They have not increased the retirement age.
3) I'm not dead by the time I meet the revised mandatory retirement age.
4) There is a population boom and enough kids enter the tax system to pay for the ageing population so that they can keep the scheme running.
5) Inflation hasn't ravaged the economy to the point where the government cannot afford to keep indexing the payments.
6) I haven't moved to Thailand to become a full time sex tourist.

Personally, I'd rather pocket the two quid a week and spend it on a bag of Tangtasics