Sanity check my plans for voluntary NICs please
Mar 14th 2021, 4:11 pm
#1
Forum Regular
Thread Starter
Joined: Oct 2010
Posts: 63
Sanity check my plans for voluntary NICs please
My situation:
UK citizen moved to US in 2011, immediately prior to which I was working in the UK for 4 continuous years. (some breaks before that)
From the UK Government Gateway, I have 20 years of full contributions, 17 years to contribute (I am about to turn 50), 14 years when I did not contribute enough.
It seems to me that paying the additional NICs to bring my state pension up to the max would be prudent as long as I live 3.2 years after starting to claim.
It is very unlikely I'll ever work in the UK again. Is there any benefit to me paying the contributions for past tax years, or should I just start regular payments for the years that remain?
I am unlikely to work 30 years in the US meaning I will need to consider WEP when it comes to drawing US Social Security but as I understand it, voluntary contributions to the UK state pension will not be a factor in the WEP calculation, correct?
While I'm here I'll ask about my wife's situation:
US citizen, age 51. Worked in the UK around 4 years total, only 2 of which were immediately before we moved to the US. Will probably end up with more than 30 years working in the US. It appears she has not enough years to qualify for any UK pension, or does the reciprocal agreement with the US allows her to count those years towards the minimum 10? In other words is she actually eligible for 4/35ths of a pension?
Is it possible to make voluntary contributions to boost her UK state pension or did she not have enough years before leaving?
So far we have been unable to get a pension statement or gov.uk account for her to check what they say.
Thanks!
UK citizen moved to US in 2011, immediately prior to which I was working in the UK for 4 continuous years. (some breaks before that)
From the UK Government Gateway, I have 20 years of full contributions, 17 years to contribute (I am about to turn 50), 14 years when I did not contribute enough.
It seems to me that paying the additional NICs to bring my state pension up to the max would be prudent as long as I live 3.2 years after starting to claim.
It is very unlikely I'll ever work in the UK again. Is there any benefit to me paying the contributions for past tax years, or should I just start regular payments for the years that remain?
I am unlikely to work 30 years in the US meaning I will need to consider WEP when it comes to drawing US Social Security but as I understand it, voluntary contributions to the UK state pension will not be a factor in the WEP calculation, correct?
While I'm here I'll ask about my wife's situation:
US citizen, age 51. Worked in the UK around 4 years total, only 2 of which were immediately before we moved to the US. Will probably end up with more than 30 years working in the US. It appears she has not enough years to qualify for any UK pension, or does the reciprocal agreement with the US allows her to count those years towards the minimum 10? In other words is she actually eligible for 4/35ths of a pension?
Is it possible to make voluntary contributions to boost her UK state pension or did she not have enough years before leaving?
So far we have been unable to get a pension statement or gov.uk account for her to check what they say.
Thanks!
Mar 14th 2021, 10:02 pm
#2
Furby
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 874
Re: Sanity check my plans for voluntary NICs please
You may qualify for Class 2 (an outstanding deal) or Class 3 (still a very good deal) depending upon your circumstances. If it were me I would start by paying as many of the prior years as you can, the reason being that you never know when or if they will change the rules on Voluntary Contributions and what they may return. As an example, a couple of years ago they were going to abolish Class 2 NIs and then reversed course, but the point is that they can change the rules at any time. The voluntary NIs for those of us living abroad are such a good deal that it would not surprise me if they don’t see that as a cost cutting measure at some point in the future and disqualify us from contributing, or reduce the benefits, or increase the cost. If that happened then you would have more years racked up before they made any changes and I think it very unlikely that any changes would apply retrospectively to existing contributions. In any case the rate of return on your contributions is so good that I think it is a very worthwhile and low risk gamble._
On the WEP question. Yes, the portion of your UK pension based upon voluntary contributions will be WEP free, so as a rough rule of thumb if you have 35 years of contributions and 15 were voluntary then only 20/35 or 4/7 of you pension would be WEP’d. You could get 8 years WEP free if you take US SS early at 62 and defer your UK pension until age 70, as you won't be WEP’d until you take the pension. That strategy works for some and not for others again depending upon your circumstances but it is something to consider.
The agreement that allows SS and NI contributions to be combined to get a pension from the UK OR the US only applies if that is the only way you can get a pension from EITHER country. In other words your wife will not be able to use her SS credits to get the UK pension because she already qualifies for US SS. I believe that if she has 3 years total NI contributions from paid UK employment then she probably can make voluntary contributions, albeit at the Class 3 rate, although that may be complicated by the fact that it has been so long since she was last in the UK. I don't think the 3 years has to be consecutive or immediately prior to leaving but would need to be 3 full NI years (i.e April to April). In any case again the return on investment is so good that I would definitely pursue that. If she has an NI number she should be able to get an account to check her details but maybe she is failing the identity checks? Anyway I would call them and ask questions to get started at 011 44 191 203 7010.
On the WEP question. Yes, the portion of your UK pension based upon voluntary contributions will be WEP free, so as a rough rule of thumb if you have 35 years of contributions and 15 were voluntary then only 20/35 or 4/7 of you pension would be WEP’d. You could get 8 years WEP free if you take US SS early at 62 and defer your UK pension until age 70, as you won't be WEP’d until you take the pension. That strategy works for some and not for others again depending upon your circumstances but it is something to consider.
The agreement that allows SS and NI contributions to be combined to get a pension from the UK OR the US only applies if that is the only way you can get a pension from EITHER country. In other words your wife will not be able to use her SS credits to get the UK pension because she already qualifies for US SS. I believe that if she has 3 years total NI contributions from paid UK employment then she probably can make voluntary contributions, albeit at the Class 3 rate, although that may be complicated by the fact that it has been so long since she was last in the UK. I don't think the 3 years has to be consecutive or immediately prior to leaving but would need to be 3 full NI years (i.e April to April). In any case again the return on investment is so good that I would definitely pursue that. If she has an NI number she should be able to get an account to check her details but maybe she is failing the identity checks? Anyway I would call them and ask questions to get started at 011 44 191 203 7010.
Mar 15th 2021, 2:40 am
#3
Forum Regular
Thread Starter
Joined: Oct 2010
Posts: 63
Re: Sanity check my plans for voluntary NICs please
Thank you very much for the quick reply. You make a very good point about the risk of the rules changing in the next 16 years, I hadn't thought of that and it was exactly the reason I posted the question.
The suggestion about taking early vs deferring is also a good point I hadn't considered but I haven't really put much effort into that side of things as it's a long time off. A decision for later!
For my wife, we do have her NI number but the problem was indeed the identity check which requires UK passport details, but she is not a UK citizen. So we will try to make that phone call to find out.
The suggestion about taking early vs deferring is also a good point I hadn't considered but I haven't really put much effort into that side of things as it's a long time off. A decision for later!
For my wife, we do have her NI number but the problem was indeed the identity check which requires UK passport details, but she is not a UK citizen. So we will try to make that phone call to find out.
