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How long do you need to pay Class II NI contributions for?

How long do you need to pay Class II NI contributions for?

Old Mar 24th 2022, 3:52 am
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Default How long do you need to pay Class II NI contributions for?

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I paid NI in the UK for 20+ years and have now been paying the Class II contributions for 6+ years while we have lived in the US.

At what point can we (or should we stop paying them)?

Thanks

Last edited by texasbound; Mar 24th 2022 at 3:53 am. Reason: sp error
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Old Mar 24th 2022, 4:42 am
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by texasbound View Post
All

I paid NI in the UK for 20+ years and have now been paying the Class II contributions for 6+ years while we have lived in the US.

At what point can we (or should we stop paying them)?

Thanks
You need 35 years.
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Old Mar 24th 2022, 8:05 am
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by vespucci View Post
You need 35 years.
I agree. If you are paying by direct debit then it should automatically stop after 35 years if you happen to forget, or if you are paying annually in response to letters from DWP with the current amount needed then those should stop automatically.
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Old Mar 24th 2022, 3:06 pm
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Default Re: How long do you need to pay Class II NI contributions for?

It depends on whether you were contracted out or not when paying NIs in the UK. If you were never contracted out then all you need is 35 years full contributions to qualify for the full state pension. If you were contracted out at any point then even with 35 years your pension will be reduced by an amount that is related to the number of years that you contracted out, but is calculated for each person individually. You may have been contracted out without being aware of it, due to being in a company pension scheme, or you may have knowingly contracted out.

if you were contracted out you can still qualify for the full pension by paying voluntary NI’s beyond the normal 35 years. Each additional NI year you now contribute adds about 5 GBP per week to your pension. Get an online is pension forecast and identify what they currently forecast with your current years of contributions, subtract that from the full pension, divide by 5 and that will tell you roughly how many more years you need to get the full pension.

In my case I need to contribute 42 full years before I qualify for the full state pension because I was contracted out when I was in the UK by virtue of being in a company pension plan. Each year that goes by my pension forecast increases by the 5GBP even though I am now past 35 years of contributions.
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Old Mar 24th 2022, 3:35 pm
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Default Re: How long do you need to pay Class II NI contributions for?

I was contacted after moving abroad that I hadn’t been contributing to my NI & that if I wanted to voluntarily contribute I had to pay back the arrears, around £3200 & to continue paying annually after that, which I chose to do. About 15 years ago they sent back my usual payment telling me that I had paid enough into the system. Hopefully my pension kicks in soon!!
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Old Mar 24th 2022, 5:27 pm
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Default Re: How long do you need to pay Class II NI contributions for?

All

Thanks, useful to know they cap the payments. In the mean time we carry on paying.
Contracted Out - Nope, we never got caught up in that one.

Does is matter if we retire early in the US?

Thanks
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Old Mar 24th 2022, 5:34 pm
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by texasbound View Post
All

Does is matter if we retire early in the US?

Thanks
No, it’s totally unrelated to anything you do in the US.
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Old Mar 26th 2022, 11:54 pm
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Default Re: How long do you need to pay Class II NI contributions for?

If I could piggyback on here living in USA since 2002

I have just today received my approval to pay Class 2 contributions and the opportunity to pay 158.60 pounds for each year from 2006 until 2020-21 which is 15 years

I have 21 years of credits already and can claim my state pension in 2030 So I need 14 years added which I could do in one go

Questions

If I pay all 15 years at once do I just write them a cheque for the total 2200 ish with a copy of the statement they have provided , paying seems a bit vague I dont see any online option Is there one?

I might have to pay for another couple of future years say a total of 16 for a period when we were contracted out. I am wondering is there a benefit to waiting for each year and paying the next future 8 years as they become due and only paying 7 of the offered 15 years of arrears. I'm happy just pay everything now from the arrears. Any problem with that or do post 2016 contributions have more value ?

Thank you for your time





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Old Mar 27th 2022, 2:15 pm
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by California1967 View Post
If I could piggyback on here living in USA since 2002

I have just today received my approval to pay Class 2 contributions and the opportunity to pay 158.60 pounds for each year from 2006 until 2020-21 which is 15 years

I have 21 years of credits already and can claim my state pension in 2030 So I need 14 years added which I could do in one go

Questions

If I pay all 15 years at once do I just write them a cheque for the total 2200 ish with a copy of the statement they have provided , paying seems a bit vague I dont see any online option Is there one?

I might have to pay for another couple of future years say a total of 16 for a period when we were contracted out. I am wondering is there a benefit to waiting for each year and paying the next future 8 years as they become due and only paying 7 of the offered 15 years of arrears. I'm happy just pay everything now from the arrears. Any problem with that or do post 2016 contributions have more value ?

Thank you for your time
That is great news that they are allowing you to buy up to 15 years, especially at the NI class 2 rate.

I would send them a cheque but specify which years and how much for each of those years count towards the cheque total.
lf you have 21 years already, then choose to buy the cheapest maximum 9 years allowed prior to 2016-17 and then 5 years beginning with the 2016-17 year. Then see where you stand with regard to your updated state pension forecast and if you have to buy 1 or 2 more years due to being contracted out earlier in your career.
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Old Mar 27th 2022, 2:27 pm
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by California1967 View Post
If I could piggyback on here living in USA since 2002

I might have to pay for another couple of future years say a total of 16 for a period when we were contracted out. I am wondering is there a benefit to waiting for each year and paying the next future 8 years as they become due and only paying 7 of the offered 15 years of arrears. I'm happy just pay everything now from the arrears. Any problem with that or do post 2016 contributions have more value ?

Thank you for your time
Pre 2016 contributions have value to the extent that they add to the 35 years required for the full pension. However once have you 35 years of pre 2016 contributions any further pre 2016 contributions are a waste of money because you get no further benefit. Each year of Post 2016 contributions will add about 5GBP a week (at current state pension rates) to your pension. The general rule should be to backfill as many pre 2016 years as you can to get to 35 years but then switch to post 2016 years.

In your case it sounds like all contributions for pre 2016 years would count towards your 35 years as would any afterwards so to that extent they have the same value. If it were me I would buy as many years as I could now, the reason being that they almost eliminated Class 2 NICs a few years ago for everyone, and they may try to do so again, so better to bank them while you can. Also, allowing expats to pay Class 2 NICs to enhance the state pension is incredibly generous and it would not surprise me if they shut that door somewhere down the line, so again bank them while you can.


I believe you have to pay back years at the present year current rates, so better to pay them sooner than later as the cost will only increase going forward.
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Old Mar 27th 2022, 3:15 pm
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by Glasgow Girl View Post
Pre 2016 contributions have value to the extent that they add to the 35 years required for the full pension. However once have you 35 years of pre 2016 contributions any further pre 2016 contributions are a waste of money because you get no further benefit. Each year of Post 2016 contributions will add about 5GBP a week (at current state pension rates) to your pension. The general rule should be to backfill as many pre 2016 years as you can to get to 35 years but then switch to post 2016 years.

In your case it sounds like all contributions for pre 2016 years would count towards your 35 years as would any afterwards so to that extent they have the same value. If it were me I would buy as many years as I could now, the reason being that they almost eliminated Class 2 NICs a few years ago for everyone, and they may try to do so again, so better to bank them while you can. Also, allowing expats to pay Class 2 NICs to enhance the state pension is incredibly generous and it would not surprise me if they shut that door somewhere down the line, so again bank them while you can.


I believe you have to pay back years at the present year current rates, so better to pay them sooner than later as the cost will only increase going forward.
Not quite, I am pretty sure that the pre 2016 years will only count towards the old full basic state pension of 30 qualifying years. More than 30 years pre 2016 will not necessarily benefit you(unless maybe they make up for some contracted out years pre 2016). You then need to buy 5 years post 2016 to obtain 35 years under the new state pension rules. After all that, from your state pension forecast, you can see if and how many more years of post 2016 years are needed to make up for any contracted out years.

You may find the article below useful;

https://www.dailymail.co.uk/money/pe...-ups-work.html

This whole area is really a mine field!
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Old Mar 27th 2022, 3:52 pm
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Default Re: How long do you need to pay Class II NI contributions for?

I decided to buy the whole amount as I am not sure which years were contracted out.

The 2006/7-2019/20 gets me to 35 and 20/21 would get me to 36 but I was contracted out for at least one year so its net 35

I found the payee account on other threads here and on the UK government website. My UK bank kept rejecting the payee account ( I used the account number paying from overseas even though the bank account is in the UK vs the paying from the UK instructions) and name of 'HMRC NIC receipts' as not matching so I sent one years payment of 158.60 pounds with the correct reference number format and will check they got it tomorrow. Any tips on this?

If that works I will send the balance next week.

Thanks guys for your help
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Old Mar 27th 2022, 4:04 pm
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Default Re: How long do you need to pay Class II NI contributions for?

I read that Daily Mail article. You are right it does not make it any clearer

I have
21 years to 2005/6
If I pay all of my years from 2006/7 to now its an extra 15 giving me 36-35 net from contracting out period maybe even slightly less net
5 of these years are 2016 onwards

I will pay them all in the next few weeks as the rates are only fixed until the end of April, 8 weeks from letter date which arrived 4 weeks from when it was dated

I will then see what my online statement says and if I need to pay for 2021-2022 and onwards for a couple more years to max it out I will do that as well

Thanks for your help
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Old Mar 27th 2022, 7:35 pm
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Default Re: How long do you need to pay Class II NI contributions for?

Originally Posted by California1967 View Post
I read that Daily Mail article. You are right it does not make it any clearer

I have
21 years to 2005/6
If I pay all of my years from 2006/7 to now its an extra 15 giving me 36-35 net from contracting out period maybe even slightly less net
5 of these years are 2016 onwards

I will pay them all in the next few weeks as the rates are only fixed until the end of April, 8 weeks from letter date which arrived 4 weeks from when it was dated

I will then see what my online statement says and if I need to pay for 2021-2022 and onwards for a couple more years to max it out I will do that as well

Thanks for your help
If you have 21 years already, as I stated earlier, I would only buy 9 more years pre 2016, as buying more will almost certainly not help you at all. Then as you say above, go ahead and buy 5 more years post April 2016. Then get a state pension forecast online and see what, if anything needs to be done regarding making up for opted out years(COPE).
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Old Mar 28th 2022, 2:21 am
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Default Re: How long do you need to pay Class II NI contributions for

Originally Posted by imacd View Post
Not quite, I am pretty sure that the pre 2016 years will only count towards the old full basic state pension of 30 qualifying years. More than 30 years pre 2016 will not necessarily benefit you(unless maybe they make up for some contracted out years pre 2016). You then need to buy 5 years post 2016 to obtain 35 years under the new state pension rules. After all that, from your state pension forecast, you can see if and how many more years of post 2016 years are needed to make up for any contracted out years.

You may find the article below useful;

https://www.dailymail.co.uk/money/pe...-ups-work.html

This whole area is really a mine field!
This is incorrect and the reason why follows. However, I do agree it is possible that some will receive no benefit from more than 30 years pre 2016 contributions, primarily those who contributed a LOT of pre 2016 years with higher than average earnings, and were contracted out for a lot of that time (not Voluntary NIs).

The state pension is calculated using a Starting Amount calculated as of 5 April 2016. The Starting Amount is calculated in two ways, using the old system that required only 30 years contributions, AND using the new system that requires 35 years of full contributions (they assume the new system had been in place since the start of your working life). They take the higher amount and use that as the Starting Amount. If your higher Starting Amount calculated on 5 April 2016 is more than the new maximum state pension then you will get that higher amount, and you will not benefit from any further contributions of any kind and the decision is easy, do not contribute any further years. You will know this because your forecast will already be higher than the maximum new pension. However, if the the forecast is less than the new maximum state pension then you can add 5.13GBP for every post 2016 year.

Contributing additional pre 2016 years up to 30 years increases the Starting Amount calculated under the old system by about 4 GBP, but is worthless after that. However, under the new system contributing additional pre 2016 years up to 35 will increase the Starting Amount by 5.13 per contribution year for up to 35 years. The new system makes a deduction for the amount of time you were contracted out, the old system does not. The old system also adds an amount related to your higher than average earnings for some of those years. Therefore if you earned higher than average earnings for the appropriate years and were contracted out for a significant period of time the old system may work out to be the higher amount.

For sure, the safest way is to max out at 30 pre 2016 years (or as close as you can get) because that will increase both Starting Amounts and then add enough post 2016 years to make up the difference between your forecast and the maximum pension. However, you run the risk of the door closing on this very generous system, particularly for expats, and/or you may not have enough time to contribute the required post 2016 contributions. The longer you were in the system contributing NIs through paid earnings at higher than average rates while contracted out the more likely it is that the old system will work better for you and probably mean that 30 years is the target for pre 2016 years. Conversely, the more pre 2016 years you are looking to backfill with voluntary NIs the more likely it is that 35 years is the target for pre 2016 years because you will have fewer years with higher earnings that were contracted out.

The only way to be sure if the years between 30 and 35 pre 2016 contributions will benefit you is to know both Starting Amounts, and they don’t provide that information any more. You can somewhat back into those calculations but it is very complex. The easiest strategy if you have the time and energy is to add enough years to get to 30 years pre 2016 contributions, get a forecast, and then add one more year at a time, and repeat until your forecast does not move.

EDIT: Late at night, too much wine (!) corrected some errors made previously.😬.

Last edited by Glasgow Girl; Mar 28th 2022 at 3:45 am.
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