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National Insurance - worth carrying on with?

National Insurance - worth carrying on with?

Old Oct 26th 2016, 6:17 pm
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Default National Insurance - worth carrying on with?

Hey guys,

Moved to the US in January on an L1B visa, no plans on going back to UK - have my green card process under way with work.

I'm 30 - and have contributed a grand total of £21k to national insurance (cool that you can see your contributions online!)

From what i read i'd have to pay Class 2 (£2.80) a week to keep this going for another 38 years

Has anyone done this and is it worth it?
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Old Oct 26th 2016, 6:43 pm
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Default Re: National Insurance - worth carrying on with?

Yes, and er, no. ..... It was worth doing, and you only need to accumulate 35 years total, so you'd probably have another 22-23 years to contribute. ..... BUT Class 2 NI is not going to be available for expats after 2017, apparently replaced by Class 3 at £715/yr, so it isn't such a good deal.

What I did was stop contributing for a few years after emigrating, until I got a bit closer to retirement (though still a long way away for me), then I picked up contributions as I got more comfortable that the state pension will still be around. At that time I made payments for six years (maximum permitted) arrears, and will get to 35 years comfortably before retirement.

Personally, if I was you, I would pick up the cheap Class 2 year(s), which for you might only be 2017, then contribute if you have a little spare money, but otherwise wait until you get closer to retirement, but being sure to leave yourself enough years to get to 35.

As I see it, it's another part of my diversified portfolio of investments, and is a nice hedge against poverty in retirement. If they make the state pension means-tested and I retire poor, I will be very glad I made contributions, and if I retire wealthy and get little or nothing then it didn't cost me much so I won't care too much as I don't "need" the state pension.

Last edited by Pulaski; Oct 26th 2016 at 6:54 pm.
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Old Oct 26th 2016, 6:52 pm
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Default Re: National Insurance - worth carrying on with?

Wise words, thanks Pulaski.

I'm swaying toward the side of paying the contributions, but that comment about the Class 3 is interesting.

So i guess I've got 38 years to contribute another 22-23 years which doesn't sound all that bad. Like you said - on the poor/wealthy - it makes sense either way.

I'd hate to think that i just lose 21k by stopping contributing, even though i know i won't get it until i'm 68.

tbh by the time i retire i'll be lucky to buy a pint with the 155 a week i'm due
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Old Oct 26th 2016, 7:00 pm
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Default Re: National Insurance - worth carrying on with?

Oh, and if you're 30 you will escape WEP (Windfall Elimination Provision, a clawback based on other pension income you have when you retire) when you reach 60 (unless you work for the government), because you will have 30 years of contributions to Social Security, so this probably won't impact you, but years of voluntary contributions towards a British state pension paid from income in the US subject to Social Security taxes, are not WEPable.
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Old Oct 26th 2016, 7:10 pm
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Default Re: National Insurance - worth carrying on with?

Ah ok, that's the first I've heard of that WEP.

So if i carry on with contributing to my UK pension with Income that I've already paid US tax on, that's excluded from that Scheme? - And then once i hit 30 years social security contributions i should be good on that side of it too?
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Old Oct 26th 2016, 7:47 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by Jack8602 View Post
Ah ok, that's the first I've heard of that WEP.

So if i carry on with contributing to my UK pension with Income that I've already paid US tax on, that's excluded from that Scheme? - And then once i hit 30 years social security contributions i should be good on that side of it too?
I came to the US in 1987 with 4 years of NI that I got in the 1970s for being at Sixth Form College and a couple of voluntary years that I paid at university. I paid Class 3 NI at first and then Class 2 when the rules changed.
Lots of people asked why I would voluntarily pay NI....but now that I have 34 years I'm so glad I did. OIt's the best financial move I ever made.

The part of the UK state pension due to voluntary contributions would not be used when calculating WEP......and if you get 30 years of substantial SS earnings in the US there will be no WEP at all.

Even if paying Class 3 NI, the UK state pension would still be a good move.....assuming the benefit stays the same.
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Old Oct 26th 2016, 8:10 pm
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Default Re: National Insurance - worth carrying on with?

With the pound being where it is, now is the perfect time to catch up on those class 2 NICs
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Old Oct 26th 2016, 9:41 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by Jack8602 View Post

tbh by the time i retire i'll be lucky to buy a pint with the 155 a week i'm due
The £155/week rises with inflation (so called triple-lock) although that may well change over time as well but there will almost certainly be some increase for inflation each year.

What is the ‘triple lock’?

The triple lock was introduced by the coalition in 2010 and was a guarantee to increase the state pension every year by the higher of inflation, average earnings or a minimum of 2.5%.
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Old Oct 26th 2016, 10:48 pm
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Default Re: National Insurance - worth carrying on with?

Ok I've got 34 full years and a couple of not full years when I was at Uni (so topping them up is gone). I guess a lump sum therefore for one year and I'm good to go? Is it worth more than the 35?


I will have to make my wifes up a lot more than that.
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Old Oct 26th 2016, 11:11 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by markcst View Post
Ok I've got 34 full years and a couple of not full years when I was at Uni (so topping them up is gone). I guess a lump sum therefore for one year and I'm good to go? Is it worth more than the 35? ....
You should contact the DWP to get a statement of your account. They will tell you how much more you need/are allowed to contribute. Once you get to 35 years they tell you to stop contributing.
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Old Oct 27th 2016, 9:27 am
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Default Re: National Insurance - worth carrying on with?

Originally Posted by markcst View Post
Ok I've got 34 full years and a couple of not full years when I was at Uni (so topping them up is gone). I guess a lump sum therefore for one year and I'm good to go? Is it worth more than the 35?


I will have to make my wifes up a lot more than that.
These days it is a straight line calculation, so 34 years will get you 34/35 x the max pension but you won't get 36/35 x the max pension.

I would check with DWP on your contributions because more than 35 years is wasted money and they would probably refund or refuse excess contributions if you tried to pay more (I think).
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Old Oct 27th 2016, 3:19 pm
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Default Re: National Insurance - worth carrying on with?

thanks for the info all.

I'm flying back in 3 weeks for my sisters wedding, and planning to tidy up on the rest of my 'admin' work whilst there.

Moving private pensions across next... joy
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Old Oct 27th 2016, 3:25 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by Jack8602 View Post
Moving private pensions across next... joy
Probably agony because you cannot transfer UK pensions to the USA and maintain their tax exempt status.
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Old Oct 27th 2016, 4:00 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by Jack8602 View Post
thanks for the info all.

I'm flying back in 3 weeks for my sisters wedding, and planning to tidy up on the rest of my 'admin' work whilst there.

Moving private pensions across next... joy
It is very unlikely that this is something you want to do, if you even can.

There are some financial services companies who specialise in transferring pensions, but what they don't tell you is that the IRS may consider moving the pensions to be a taxable event, and that you will probably end up paying much more in administration fees than if you'd just left the money where it is.
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Old Oct 27th 2016, 4:06 pm
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Default Re: National Insurance - worth carrying on with?

Originally Posted by Owen778 View Post
It is very unlikely that this is something you want to do, if you even can.

There are some financial services companies who specialise in transferring pensions, but what they don't tell you is that the IRS may consider moving the pensions to be a taxable event, and that you will probably end up paying much more in administration fees than if you'd just left the money where it is.
+10^6

You cannot move UK pension money to a US retirement account and as a US resident it is very unwise to move UK pensions out of the country....ie avoid QROPS. You can move the UK pension money between UK pension providers though.
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