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National Insurance

Old Jun 22nd 2012, 8:46 pm
  #61  
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Default Re: National Insurance

Originally Posted by mattlmt View Post
Thanks for the update on this Class 2 or Class 3 Contributions.

My understanding is Class 2 Contributions are self-employed contributions and not Voluntary Contributions as such.
Class 2 NI contributions are payable by the self-employed AND in certain circumstances on a voluntary basis if you live abroad. To qualify to pay voluntary NI

"you must have lived in the UK for a continuous three-year period at any time before making your payments
or

before you went abroad, you paid National Insurance contributions for three years or more"

In order to pay voluntary Class 2 contributions you must be employed or self employed abroad and either have been:

"'ordinarily' employed or self-employed immediately before you went abroad

or

'ordinarily' employed or self-employed but became unemployed immediately before you went abroad to work ('unemployed' means registered as unemployed with the Department for Work and Pensions and looking for work)"
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Old Jun 22nd 2012, 8:54 pm
  #62  
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Default Re: National Insurance

Originally Posted by NatashaB View Post
Can someone confirm the difference between class 2 and class 3 contributions?

I have about 15 years to pay in order to get my 30 years in and be eligible for a UK pension. If I choose to make voluntary contributions, but my husband does not, can we still claim the additional amount for a couples pension rate (160% of the single rate I think?)
Here is a link with the benefits that come with Class 1, 2 and 3 NI contributions

http://www.hmrc.gov.uk/ni/intro/benefits.htm

you'll notice that Class 2 contributions qualify you for more benefits than Class 3 and they are also less expensive....... go figure, but it's true. Most people who grew up in the UK and are employed abroad will qualify to pay Class 2 NI.

If you pay Class 2 but your husband does not under current rules you will get the basic state pension for married persons based on your contributions. If you have 30 years that would be 160% of the single persons pension under current rules. If your husband also paid you could qualify for two basic state pensions......so only one of you contribution is a pretty good deal, as long as you stay together. but at 130GBP per year for Class 2 NI it's stupid not to build up your contributions if you think you might not get 30 year's of NI from working in the UK.
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Old Jun 22nd 2012, 8:58 pm
  #63  
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Default Re: National Insurance

Originally Posted by MattySD View Post
I'm 45, I left the UK in 2003 and have been paying class 3 NI contributions ever since by direct debit from my UK bank account, I only have about 2 years left after this one till I've paid in enough qualifying years. I thought that was what I needed to do to get a full pension. However, all the posts in this thread have confused me - have I wasted my money paying class 3 contributions - should I stop and pay the much cheaper class 2 instead for the remainder of the time? My finances are very tight and I could do with the extra cash! I have been working full time in the US since 2004.
Basically yes. If you qualify for Class 2 it is the way to go. I started paying Class 3, but in the early 1990s the rules changed and allowed Class 2 contributions for people employed abroad.
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Old Jun 22nd 2012, 9:02 pm
  #64  
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Default Re: National Insurance

Originally Posted by nun View Post
Basically yes. If you qualify for Class 2 it is the way to go. I started paying Class 3, but in the early 1990s the rules changed and allowed Class 2 contributions for people employed abroad.
Thank you for your post - If you are correct then I and others here have wasted a lot of money.
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Old Jun 22nd 2012, 9:03 pm
  #65  
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Default Re: National Insurance

Originally Posted by nun View Post
Basically yes. If you qualify for Class 2 it is the way to go. I started paying Class 3, but in the early 1990s the rules changed and allowed Class 2 contributions for people employed abroad.
When I applied to make Class 2 contributions, I had to supply a list of employment I have and had in the US, the latter presumably because I was also paying six years of back contributions. Whether they actually did any kind of check on the information I gave them, I have no clue.
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Old Jun 22nd 2012, 9:11 pm
  #66  
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Default Re: National Insurance

In my correspondence with HM Revenue and Customs I have always been given the impression that I had to pay Class 3 contributions until year 30 in order to get a full pension on my retirement - this is very depressing to this heavily-in-debt guy!
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Old Jun 22nd 2012, 9:14 pm
  #67  
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Default Re: National Insurance

Originally Posted by mattlmt View Post
Sally,

It all goes back to the US Social Security position that lower paid workers get a higher percentage return for the money they have put in the system in relation to Higher Paid workers. I think they quote a 55% to 25% on the US SSA website. The US system has nothing to do with need, but entitlement.

The WEP deduction on foreign worked pensions, where a person has not accomplished thirty years of worked sustainable income in the United States, is supposed to equalize or reduce entitlement compared to those who have had thirty years of Sustainable Earnings!

That it discriminates against immigrants who rely on both systems is part of the story of the current attempts to repeal WEP. As mentioned in other posts, I encourage you to write to your senators/rep and sign the petition linked here.
WEP is not really targeted at foreign pensions which are a small proportion of what gets WEPed. It's in place mostly for the people that work in state government who don't pay into SS, but have worked in SS paying jobs previously and stops them getting a proportionally bigger SS pension due to an incomplete contributions record. In my case I will get an MA state pension and that will reduce my SS by the maximum WEP amount which I estimate will be $600/month by the time I reach 66.

Just to emphasis any UK pension you get that was paid for by voluntary NI contributions is not included in WEP calculations. The pension must be from non-SS wages. So any UK private pension you have from UK employment and the state pension due to Class 1 compulsory NI will be included in WEP.
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Old Jun 22nd 2012, 9:16 pm
  #68  
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Default Re: National Insurance

Originally Posted by Giantaxe View Post
When I applied to make Class 2 contributions, I had to supply a list of employment I have and had in the US, the latter presumably because I was also paying six years of back contributions. Whether they actually did any kind of check on the information I gave them, I have no clue.
Yes I had to give them my original employer in the US. I've since changed employer a few times, but haven't bothered to let them know, HMRC just sends me the annual bill and I pay it.

Here is all the information you need to determine what NIC you should pay and how to do it.

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

Last edited by nun; Jun 22nd 2012 at 9:19 pm.
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Old Jun 22nd 2012, 9:18 pm
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Default Re: National Insurance

Originally Posted by nun View Post
Yes I had to give them my original employer in the US. I've since changed employer a few times, but haven't bothered to let them know, HMRC just sends me the annual bill and I pay it.
So for all they know you could have been unemployed for years
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Old Jun 22nd 2012, 9:36 pm
  #70  
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Default Re: National Insurance

Originally Posted by nun View Post
Class 2 NI contributions are payable by the self-employed AND in certain circumstances on a voluntary basis if you live abroad. To qualify to pay voluntary NI

In order to pay voluntary Class 2 contributions you must be employed or self employed abroad and either have been:

"'ordinarily' employed or self-employed immediately before you went abroad
From what I can see it's not what the Brits think, it's what the Americans think!

If you paid Class 2 self-employed contributions to the UK scheme, and you do not have enough US Sustained Earnings over thirty years sliding as a % to 20 years and under, you'll pay WEP.

If you were self-employed (working) and resident in the States (and paying FICA which you need to do by law if you legally reside here) and paying Class 2 SE contributions to the UK scheme, then you are paying twice and subject to WEP.

From what I understand, WEP can only be avoided by Class 3 Voluntary Contributions, reaching the US Sustainable Earnings requirement, or using the Totalization Agreement where you can take both systems and make one benefit. The Totalization Agreement doesn't come in to play if you are qualified in either system.

There are assumed "administrative" costs related to a Class 3 because of non-residency, or as it's termed in the UK 'not ordinary resident', that are not in class 2.

I hope I'm wrong, but you can avoid it all by helping us repeal WEP through Senate Bill S2010 Social Security Fairness Act! A lot of Senators and Reps know nothing about WEP, but we're getting the word out. As it affects over two million people, we need your help by signing the petition:

http://signon.org/sign/social-securi...mt&r_by=695993

Any problems with the link, please let me know.

Matt
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Old Jun 22nd 2012, 9:43 pm
  #71  
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Default Re: National Insurance

Originally Posted by Giantaxe View Post
So for all they know you could have been unemployed for years
Yes, but then I would have paid Class 3 contributions.
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Old Jun 22nd 2012, 9:45 pm
  #72  
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Default Re: National Insurance

Originally Posted by mattlmt View Post
From what I can see it's not what the Brits think, it's what the Americans think!

If you paid Class 2 self-employed contributions to the UK scheme, and you do not have enough US Sustained Earnings over thirty years sliding as a % to 20 years and under, you'll pay WEP.

If you were self-employed (working) and resident in the States (and paying FICA which you need to do by law if you legally reside here) and paying Class 2 SE contributions to the UK scheme, then you are paying twice and subject to WEP.

From what I understand, WEP can only be avoided by Class 3 Voluntary Contributions, reaching the US Sustainable Earnings requirement, or using the Totalization Agreement where you can take both systems and make one benefit. The Totalization Agreement doesn't come in to play if you are qualified in either system.

There are assumed "administrative" costs related to a Class 3 because of non-residency, or as it's termed in the UK 'not ordinary resident', that are not in class 2.

I hope I'm wrong, but you can avoid it all by helping us repeal WEP through Senate Bill S2010 Social Security Fairness Act! A lot of Senators and Reps know nothing about WEP, but we're getting the word out. As it affects over two million people, we need your help by signing the petition:

http://signon.org/sign/social-securi...mt&r_by=695993

Any problems with the link, please let me know.

Matt
Class 2 NICs are voluntary if you are abroad and are therefore not considered in WEP. If you paid Class 2 self-employed NICs while in the UK they would be included in a WEP calculation because they are paid form non-SS wages. You must make this known to SSA when you apply for SS.

Many people in the US don't pay FICA....or at least all of it. Many states opt out of the SS portion and their employees only pay medicare. if you are coming to WEP repeal form a foreign pension angle I don't think you'll get much notice from the US Senate and House. If it's general WEP opposition how will you deal with the inequitable amount of SS people will receive if they have less than 30 years of SS contributions? I read your petition......I don't agree with it.

Last edited by nun; Jun 22nd 2012 at 9:57 pm.
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Old Jun 22nd 2012, 9:46 pm
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Default Re: National Insurance

Originally Posted by nun View Post
Yes, but then I would have paid Class 3 contributions.
Sure, if you were honest. But the UK NI would have been none the wiser if you'd carried on paying the (cheaper) class 2 contributions.
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Old Jun 22nd 2012, 10:04 pm
  #74  
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Default Re: National Insurance

Originally Posted by Giantaxe View Post
Sure, if you were honest. But the UK NI would have been none the wiser if you'd carried on paying the (cheaper) class 2 contributions.
That is correct, and yes I am honest. It's the curse of being a scientist and raised methodist.

I actually had a very nice phone call from HMRC the other day. I paid my 30th NIC recently and emailed HMRC to confirm that i was done and that I have 30 years of NICs. They actually called my cell phone and confirmed that I had 29 years and that the one I had just sent would make 30 and I didn't need to pay anymore.......all done in a great Geordie accent too that made me want to move back to the North East sooner rather than later.
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Old Jun 22nd 2012, 10:10 pm
  #75  
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Default Re: National Insurance

Originally Posted by nun View Post
That is correct, and yes I am honest. It's the curse of being a scientist and raised methodist.

I actually had a very nice phone call from HMRC the other day. I paid my 30th NIC recently and emailed HMRC to confirm that i was done and that I have 30 years of NICs. They actually called my cell phone and confirmed that I had 29 years and that the one I had just sent would make 30 and I didn't need to pay anymore.......all done in a great Geordie accent too that made me want to move back to the North East sooner rather than later.
Yes, all the ladies at HMRC I've spoken to have delightful accents!
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