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Anyone retiring to the UK on Social security only

Anyone retiring to the UK on Social security only

Old Dec 15th 2014, 7:58 pm
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Uncle_Bob View Post
The wife and i applied and got reply, they want around 700 pounds for each year going back 6 or 7 years i think. For each of us. It would cost us approx $7k each to catch up
I'm not sure if its worth it, i could put $14k in an investment vehicle here.
The class NICS are a no brainer if you have recently been employed and making NIs in the UK. I think i missed the boat on this one. But then again i could have been paying only to retire and find out the government has changed the rules.

Or did i maybe apply to pay the wrong class of NICs?
Yes - Class II are definitely not that expensive.
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Old Dec 15th 2014, 11:53 pm
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Default Re: Anyone retiring to the UK on Social security only

Thanks for all the advice, I am going to fill in the form and request class 2 and see what happens.

I think this is an area where there can be a lot of misunderstandings and its great to get lots of input.
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Old Dec 16th 2014, 12:39 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by dunroving View Post
Yes - Class II are definitely not that expensive.
Just got home from work and can confirmed i screwed up my application and did fact request class 3 NICs. I'm going to write back and request class 2 rather than resubmit another application, when you get a reply it seems you have a International casework assigned and a reference number.
This seems like a no brainer if you can do it. I will ask my financial adviser first though.

Last edited by Uncle_Bob; Dec 16th 2014 at 12:44 am.
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Old Dec 16th 2014, 1:03 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Uncle_Bob View Post
Just got home from work and can confirmed i screwed up my application and did fact request class 3 NICs. I'm going to write back and request class 2 rather than resubmit another application, when you get a reply it seems you have a International casework assigned and a reference number.
This seems like a no brainer if you can do it. I will ask my financial adviser first though.
I did a spreadsheet based on comparing buying the extra years, or investing the same money elsewhere. I assumed a 5% investment return after inflation, and kept everything else in today's dollars for simplicity.

My husband and I both currently have 19 years in the UK system, so would need 16 to make it a full pension. He is eligible to pay Class 2, I would have to pay Class 3.

His breakeven point was 1.75 years; ie, if he receives the additional income for that long after his retirement date (67) without dying, he wins. Totally worth a punt.

My breakeven point was 10.6 years, due to paying/ theoretically investing the higher rate. With my state pension age also being 67, I therefore have to live until 77-78 before I'm better off having paid the voluntary contributions.

That still seems a pretty good bet to me, as women in my family tend to live into their 90s. I'm probably much healthier than my nan, born at the turn of the last century, lived in extreme poverty, through world wars etc - I live a very healthy lifestyle and have no current medical conditions whatsoever, so the odds are stacked in my favour both genetically and through living choices.

Having a larger inflation-protected income stream from 67 onwards will give me more choices about what to do with the bulk of my more liquid money; it'll help create a nice spending floor for me for necessities in retirement and will probably mean I can adopt a strategy like high dividend yield rather than having to go for a fixed annuity at whatever the rate might be at the time. That has some 'insurance' value to me, that I'm willing to pay a certain amount for now.

If I make it to my late 70s, I'll be delighted at the choice made by my 40-something year old self.

And if I don't make it..? Well, I'll be dead. What will I care at that point? The 'but I might regret it' seems very heavily stacked on one side, in my opinion.

I'm also planning on taking Social Security as late as possible, for the same reasons, (always assuming the way it's structured doesn't change dramatically before we retire).
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Old Dec 16th 2014, 1:53 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by kodokan View Post
I did a spreadsheet based on comparing buying the extra years, or investing the same money elsewhere. I assumed a 5% investment return after inflation, and kept everything else in today's dollars for simplicity.

My husband and I both currently have 19 years in the UK system, so would need 16 to make it a full pension. He is eligible to pay Class 2, I would have to pay Class 3.

His breakeven point was 1.75 years; ie, if he receives the additional income for that long after his retirement date (67) without dying, he wins. Totally worth a punt.

My breakeven point was 10.6 years, due to paying/ theoretically investing the higher rate. With my state pension age also being 67, I therefore have to live until 77-78 before I'm better off having paid the voluntary contributions.

That still seems a pretty good bet to me, as women in my family tend to live into their 90s. I'm probably much healthier than my nan, born at the turn of the last century, lived in extreme poverty, through world wars etc - I live a very healthy lifestyle and have no current medical conditions whatsoever, so the odds are stacked in my favour both genetically and through living choices.

Having a larger inflation-protected income stream from 67 onwards will give me more choices about what to do with the bulk of my more liquid money; it'll help create a nice spending floor for me for necessities in retirement and will probably mean I can adopt a strategy like high dividend yield rather than having to go for a fixed annuity at whatever the rate might be at the time. That has some 'insurance' value to me, that I'm willing to pay a certain amount for now.

If I make it to my late 70s, I'll be delighted at the choice made by my 40-something year old self.

And if I don't make it..? Well, I'll be dead. What will I care at that point? The 'but I might regret it' seems very heavily stacked on one side, in my opinion.

I'm also planning on taking Social Security as late as possible, for the same reasons, (always assuming the way it's structured doesn't change dramatically before we retire).
The only issue I would add to your break-even point is whether you think there is a likelihood of the UK State pension could end up being means-tested (and your US and private pensions making you too wealthy on the testing). Most posters think this unlikely, I think it inevitable.
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Old Dec 16th 2014, 2:13 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Cape Blue View Post
The only issue I would add to your break-even point is whether you think there is a likelihood of the UK State pension could end up being means-tested (and your US and private pensions making you too wealthy on the testing). Most posters think this unlikely, I think it inevitable.
Yes, I have considered the possibility of it being reduced/ eliminated. Frankly, I'm surprised they're even still offering voluntary contributions for overseas people; I'm expecting that door to be slammed shut at some point. I can't believe it wasn't part of the dialogue resulting in the cessation of spousal pensions for overseas claimants.

I'm not sure they can just go 'ta da! Pension is now means-tested!' though. (Well, they can, but I mean politically.) It's too embedded into the National Insurance contributions, absolutely, categorically: pay NI for Year X, receive a credit for your pension.

If they made it means-tested, they'd effectively be announcing that the distinction between NI and regular income tax was meaningless, and that the money they were taking off you was simply paying for public services/ liabilities today, not something for the future (which I know is how it works in reality, but in perception...). If they told people that NI no longer earned them credits for a pension, then it's just another tax. They'd be declaring the UK rate of higher income tax (which would be the people affected) to be 52%. There'd be blood on the streets, and the exodus of high-earners that people keep muttering about might actually happen.

Still, it's a possibility - everything is. I view my UK pension as longevity insurance, rather than a pension per se. To make it up to the full 35 years from the current 19 will cost in the region of $18k over the next X years. That's what we've paid as a family in health insurance premiums in the 3 years we've been here, and we've had b****r all back for that!

Our retirement strategy is one of early retirement, and the ability to be very flexible on what will be considered 'income' from one year to the next. So I have some wriggle room there, I think. We're frugal folk, and planning to live within modest means from an 'income' point of view. Even if it does get means-tested, I personally will have very little income on paper anyway. As I've been non-working since we started expatting, and the UK considers individual rather than joint taxation, I will technically be rather poor...

I think it's worth the $18k investment for me, given I'll have very little other fixed income/ pension products coming in, in my name. And still worth it for hubby, as he'll only have to pay about $3.5k to top him up in total.
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Old Dec 16th 2014, 2:32 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by kodokan View Post
I'm not sure they can just go 'ta da! Pension is now means-tested!' though. (Well, they can, but I mean politically.) It's too embedded into the National Insurance contributions, absolutely, categorically: pay NI for Year X, receive a credit for your pension.

...

I think it's worth the $18k investment for me, given I'll have very little other fixed income/ pension products coming in, in my name. And still worth it for hubby, as he'll only have to pay about $3.5k to top him up in total.
I agree. Even if means-testing is introduced at some point in the future, the probability is that it would be introduced gradually and would be unlikely to be applied to those near or in retirement. To me Class 2, at least, voluntary contributions are a non-brainer, although maybe I would feel differently if I were a long way from retirement.
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Old Dec 16th 2014, 2:37 am
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Default Re: Anyone retiring to the UK on Social security only

Tagging on the OP question. I have 28 yrs SS contributions in the US. I won't retire for another 13 years. I have 5 yrs NI contributions from '79-'84, Spent 2 yrs traveling and then to the US in 1986. I really don't know where I will retire. My goal is to complete 30 yrs in the US to avoid WEP, and then decide about where I want to be. I also have a Veterans Administration/DoD pension for life. Should I look into NIC if I am even remotely thinking about a move back to retire?
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Old Dec 16th 2014, 2:44 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by DebzinUS View Post
. Should I look into NICs if I am even remotely thinking about a move back to retire?
If I understand and remember the rules correctly, you have to have paid 11 years of NICs before you can pay additional voluntary contributions as an expat. You should look into it to make sure, but I don't think you'll be eligible to pay in any more to the NI scheme unless you return to live and work in the UK.
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Old Dec 16th 2014, 2:45 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by DebzinUS View Post
Tagging on the OP question. I have 28 yrs SS contributions in the US. I won't retire for another 13 years. I have 5 yrs NI contributions from '79-'84, Spent 2 yrs traveling and then to the US in 1986. I really don't know where I will retire. My goal is to complete 30 yrs in the US to avoid WEP, and then decide about where I want to be. I also have a Veterans Administration/DoD pension for life. Should I look into NIC if I am even remotely thinking about a move back to retire?
I don't think whether you end up living in the US or the UK is really relevant to your decision. If I were in your position I would be paying voluntary Class 2 NICs regardless.
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Old Dec 16th 2014, 2:52 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Giantaxe View Post
.... If I were in your position I would be paying voluntary Class 2 NICs regardless.
I don't think she will be able to.
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Old Dec 16th 2014, 2:53 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Pulaski View Post
I don't think she will be able to.
Hmm, do you have anything to back up your assertion?

Edit: seems to be a minimum of 3 prior years of NI contributions:

http://www.worldofexpats.com/volunta...st-kept-secret

Last edited by Giantaxe; Dec 16th 2014 at 2:58 am.
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Old Dec 16th 2014, 2:59 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Giantaxe View Post
Hmm, do you have anything to back up your assertion?
Not immediately to hand other than that I am currently working on setting up my own additional voluntary Class 2 contributions and was reading the leaflet I was sent earlier this year. I was interested if Mrs P could also pay Class 2's but I noted that she was far short of having reached the point where she would be allowed to make her own voluntary contributions. If she was eligible you can be dämn sure she would be making them too.

Last edited by Pulaski; Dec 16th 2014 at 3:02 am.
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Old Dec 16th 2014, 3:01 am
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Default Re: Anyone retiring to the UK on Social security only

Originally Posted by Giantaxe View Post
Hmm, do you have anything to back up your assertion?

Edit: seems to be a minimum of 3 years of NI contributions. ....
Interesting. Still too long for Mrs P.
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Old Dec 16th 2014, 3:05 am
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Default Re: Anyone retiring to the UK on Social security only

I am headed home for a few weeks. I will give Newcastle a call, and see what I can find out. Thanks for the responses.
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