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national ins contributions

Old Apr 5th 2011, 11:37 pm
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Question national ins contributions

I have been in the US for five years and have been unemployed and married to a US citizen. I am 55 years old. I had a nearly complete record of NI contributions in the UK before relocating. I decided to pay in voluntary contributions to the NI scheme.

Is it possible to receive my UK pension here in the US in addition to US social security that I will get if I pay in for 40 quarters? Is it worthwhile for me to keep up with the NI payments? They are getting more expensive all the time.
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Old Apr 6th 2011, 1:26 am
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Default Re: national ins contributions

Yes and at your age, yes.
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Old Apr 6th 2011, 2:38 am
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Default Re: national ins contributions

Yes and remember you only need to pay 30 years worth in the UK now
you may have already done so ...you can get a pension forecast
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Old Apr 12th 2011, 3:32 pm
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Default Re: national ins contributions

Hi, Just on this subject does anyone know a good link for explaining the ins and outs of uk state pensions ect when moving to the US??
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Old Apr 12th 2011, 3:41 pm
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Default Re: national ins contributions

They are really helpful by phone too.

www.hmrc.gov.uk/cnr/osc.htm
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Old Apr 12th 2011, 6:19 pm
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Default Re: national ins contributions

Originally Posted by kassia246 View Post
I have been in the US for five years and have been unemployed and married to a US citizen. I am 55 years old. I had a nearly complete record of NI contributions in the UK before relocating. I decided to pay in voluntary contributions to the NI scheme.

Is it possible to receive my UK pension here in the US in addition to US social security that I will get if I pay in for 40 quarters? Is it worthwhile for me to keep up with the NI payments? They are getting more expensive all the time.
If you have 30 years of NI you don't have to pay anymore to qualify for full basic state pension.

If you do pay voluntary NI you will qualify for Class 2 which is 2.10 pound a week.

You can get your UK pension paid to you in the US.

Your UK pension will reduce the US SS you get unless you have something like 35 years of US SS payments.
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Old Apr 12th 2011, 6:20 pm
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Default Re: national ins contributions

Originally Posted by nun View Post
Your UK pension will reduce the US SS you get unless you have something like 35 years of US SS payments.
30 years.

I've never been convinced that it's worth paying voluntary contributions to NI given how relatively low the UK pension is and the fact that the windfall provision may reduce your US SS.

Last edited by Giantaxe; Apr 12th 2011 at 6:23 pm.
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Old Apr 12th 2011, 8:29 pm
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Default Re: national ins contributions

Originally Posted by Giantaxe View Post
30 years.

I've never been convinced that it's worth paying voluntary contributions to NI given how relatively low the UK pension is and the fact that the windfall provision may reduce your US SS.
If you pay Class 2 it's definitely worth it as they are only 2.10 GBP a week and you'll get at least 140 GBP pension a week with the new flat rate. This more than makes up for the WEP.
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Old Apr 12th 2011, 8:56 pm
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Default Re: national ins contributions

Originally Posted by nun View Post
If you pay Class 2 it's definitely worth it as they are only 2.10 GBP a week and you'll get at least 140 GBP pension a week with the new flat rate. This more than makes up for the WEP.
Does it? I don't see how you can tell one way or the other from that information. The flat rate pension is proposal right now, and how it affects people with incomplete contribution records who have contributed in countries with which the UK has a reciprocal SS agreement is unclear.
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Old Apr 12th 2011, 9:43 pm
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Default Re: national ins contributions

As of 10th April 2011, Class 2 (self-employed) national insurance contributions will be £2.50 per week.

Class 3 (voluntary) contributions will be £12.60 per week.

I have the notification in my grubby little paws as I type

Prior to seeing this thread, I was assuming that I would be paying Class 3 contributions when I move over to the US - is this not so then?
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Old Apr 12th 2011, 10:21 pm
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Default Re: national ins contributions

Originally Posted by Giantaxe View Post
Does it? I don't see how you can tell one way or the other from that information. The flat rate pension is proposal right now, and how it affects people with incomplete contribution records who have contributed in countries with which the UK has a reciprocal SS agreement is unclear.
You'll have to run the numbers for your particular situation, but it's a great deal for me. I'll have a complete 30 year NI record in a couple of years so I'll get basic UK state pension, whatever that is when I turn 66, I'm 49 now. I have 14 years of SS payments and 11 years of work for a US state where I don't pay SS. So even without my UK pension I would be WEPed up to the maximum amount because of my US state pension. If I didn't work for a US state I'd be closing in on 30 years of contribution and would not get WEPed. SS admin has a nice WEP and SS estimator on their website. Over the 30 years of my NI payments I calculate I'll have paid around 4.5K GBP in total as I had a couple of years paying Class 3 before they changed the law to allow Class 2 contributions. So that's such a small amount that it would be dumb not to pay it to get the UK pension.
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Old Apr 12th 2011, 10:25 pm
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Default Re: national ins contributions

Originally Posted by rallybug View Post
As of 10th April 2011, Class 2 (self-employed) national insurance contributions will be £2.50 per week.

Class 3 (voluntary) contributions will be £12.60 per week.

I have the notification in my grubby little paws as I type

Prior to seeing this thread, I was assuming that I would be paying Class 3 contributions when I move over to the US - is this not so then?
It depends on your work situation. If you are working for a foreign employer in a foreign country then you probably qualify to pay Class 2. Here's a link with the info. Class2 is cheaper than Class3 and has better benefits.

http://www.hmrc.gov.uk/ni/volcontr/abroad.htm

Last edited by nun; Apr 12th 2011 at 10:29 pm.
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Old Apr 12th 2011, 10:28 pm
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Default Re: national ins contributions

Originally Posted by nun View Post
So that's such a small amount that it would be dumb not to pay it to get the UK pension.
Again, how can you tell? The thing that you need to know is what incrementally you will be receiving extra for one year's voluntary contributions. Or whether voluntary contributions make you able to qualify at all. Then you would have to compare that with what you would likely receive if you had instead invested the amount of the voluntary contribution in a tax-deferred (or Roth) account. And, as you mention, the proposed changes to a flat rate scheme add another bunch of unknowns.

I'm not disagreeing with you, btw, just asking you to justify your assertions.
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Old Apr 12th 2011, 10:33 pm
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Default Re: national ins contributions

Originally Posted by nun View Post
It depends on your work situation. If you are working for a foreign employer in a foreign country then you probably qualify to pay Class 2. Here's a link with the info. Class2 is cheaper than Class3 and has better benefits.

http://www.hmrc.gov.uk/ni/volcontr/abroad.htm
I pay Class 2 at the moment as I'm self-employed in the UK working for the company I was previously employed by - if I stay working for them after moving to the US, then I presume I'd be paying the normal contributions (Class 2 + the extra at tax return time).
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Old Apr 12th 2011, 11:48 pm
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Default Re: national ins contributions

Originally Posted by Giantaxe View Post
Again, how can you tell? The thing that you need to know is what incrementally you will be receiving extra for one year's voluntary contributions. Or whether voluntary contributions make you able to qualify at all. Then you would have to compare that with what you would likely receive if you had instead invested the amount of the voluntary contribution in a tax-deferred (or Roth) account. And, as you mention, the proposed changes to a flat rate scheme add another bunch of unknowns.

I'm not disagreeing with you, btw, just asking you to justify your assertions.
The following assumes current or proposed legislation that I know about.
I will qualify for basic UK state pension at 66. I currently have 25 years of contributions and will keep paying up to 30 years. I qualify for US SS based on 14 years of contributions and will get $1400 a month at age 66 with the max WEP due to my also getting a US state pension. That non SS benefit will use up all my WEP even before you include the UK basic state pension.

I've done the calculations about whether the Class2 NI payments are worth it. If I'd put them instead into a ROTH and compounded the 2.50 a week at 5% interest over 30 years I'd have around 9k. Then let that grow for another 11 years (until I'm 66) at 5% with no additions and I'd end up with 15k. The currently proposed UK flat rate pension will be about 7k a year. If that rises by 3% (inflation) a year for 16 years, when I'll be 66 it will be 11k a year inflation linked for as long as I live. At 5% interest the 15k in a ROTH would last 2 years with 11k annual withdrawals.

Last edited by nun; Apr 13th 2011 at 12:02 am.
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