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National Insurance- post retirement

Discussion in 'Retirement' started by hinson76, Mar 28, 2020.

  1. hinson76

    hinson76 New commenter

    Although I have 40 years contributions, the HMRC website it is showing that I still need to contribute a further 6 years to get the maximum £168 as opposed to a current projection of £144. I'm informed that due to teachers being members of the Teachers Pension scheme I have paid reduced NI.
    Since retirement I work one day a week as a sixth form mentor and as an invigilator at a university and school.
    Can I therefore pay class 2 contributions as a lump sum for April 2019-2020? and monthly instalments thereafter
    Just wondered if anybody was in a similar position?
  2. diddydave

    diddydave Established commenter

    You will need to do a tax return, just contact HRMC and inform them that you are working as an invigilator and you should then be able to choose to pay the class 2 voluntary contributions. There's no rush though as you can pay up to 6 years (I think) later. Certainly when I finish completing the tax return I am asked if I want to pay voluntary NI.

    However, the chancellor's comments about the self-employed having to pay tax 'equally' in the future hints that this won't be available for much longer.
  3. eljefeb90

    eljefeb90 Senior commenter

    What @diddydave said, although I don't think a tax return is necessary as both your jobs are under PAYE. I have been paying class two contributions for a year or two and all I did was phone up HMRC. If you work as a mentor and do invigilation you may get credit towards your state pension by surpassing the lower earnings limit of £118 gross per week. At the lower end, they do not actually deduct any money towards N.I. , so it is a bit confusing.
    As diddydave also pointed out , the Chancellor dropped a heavy hint that the self employed will become liable for full N.I. contributions in the near future. Whatever happens, it is well worth it , as each additional year is worth about £18 a month in state pension for the rest of your life.
    A third possibility is to make class 3 voluntary contributions. This is for those who are fully retired ( i.e. it in any kind of paid work) and have yet to reach state pension age. It is more expensive at about £770 a year, so you will ' break even' after about three and a half years of retirement.
  4. Many thanks DiddyDave, i am going to ring HMRC tomorrow.
  5. Many thanks Eljef, I will ring HMRC tomorrow and see if I pay a lump sum for 2019/20.
  6. sadscientist

    sadscientist Senior commenter

    Correct advice above - If you work as an invigilator you can pay voluntary Class 2 NI as an annual payment - you don’t need to do a self assessment.
    There’s usually about a six month delay after the end of the tax year.

    border_walker likes this.
  7. NoseyMatronType

    NoseyMatronType Star commenter

    I also have a National Insurance related question.

    I turn 60 in 21 months time. I am no longer teaching and will be living off personal savings until then.

    However, I am wondering what the best and cheapest way to maintain my NI contributions might be until I become eligible for the Teacher’s Pension?

    Am I right in thinking that maybe the best thing to do is go self employed and pay the contributions that accord with that status, even if I don’t earn anything in the time that remains?

    Thanks in advance for any advice anyone reading this query might be able to provide.
  8. diddydave

    diddydave Established commenter

    Firstly check your NI record to see how many more years you actually need:

    You can still pay for up to 6 years ago if you have any gaps.

    The cheapest way is to pay the class 2 voluntary NI (but the Chancellor did hint that this isn't going to be available for much longer in his COVID briefing) - the list of available jobs is here:

    I'd say your best bet would be to give HMRC a call and ask them if you qualify for one of those jobs...I'm not sure being 'self-employed' but doing nothing would count. However, I did see one of the 'jobs' on the list above was "making investments" - would putting your savings into an ISA count?

    I'd be a little bit wary though as on this page: https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions it says that if you are "unemployed and not claiming benefits" you have to pay the class 3.

    Also, I don't think you need to do it before you take your teacher's pension - you can still be employed (self or otherwise) and pay NI after 60.

    Finally, are you deliberately waiting until 60 to claim your pension - if so have you had a look at my AAB comparison which shows how taking it a little early means you are better off until you reach your 80s or 90s: https://docs.google.com/spreadsheets/d/1MmQ1h1AwCoC5IggRdVai4L0aBu5j0subZHCkVe3JNOw/edit?usp=sharing
  9. eljefeb90

    eljefeb90 Senior commenter

    The only caveats I would give you, @NoseyMatronType , would be that you would have to state what you were doing to earn a living. If you are living off savings, you
    would be paying class 3 voluntary contributions, which is about £770 a year and several times more than the self employed rate. The obvious route around this is to declare yourself an examiner or invigilator , which will not work this year. I suggest you state that you are a private tutor.
    Secondly, the rate for the self employed will almost certainly be equalised with the employed rate sooner rather than later, so Class 3 payments at still be the best deal. They are still a great investment in my opinion, as you will get just over £200 a year in extra state pension for your £770. You do need to live to be 70 in order to really cash in on this investment!
    NoseyMatronType likes this.
  10. NoseyMatronType

    NoseyMatronType Star commenter

    Many thanks for the detailed advice!

    I am registered as a private tutor and would have done some exam marking for AQA had the GCSE’s gone ahead.

    The last time I checked, I was on course to receive the state pension.

    Will investigate those links.

    Once again, thanks for responding so promptly.
    eljefeb90 likes this.
  11. NoseyMatronType

    NoseyMatronType Star commenter

    About two months ago, I received a contract to do some marking for AQA.

    Of course, this marking won’t now happen but in subsequent communications the contract has yet to be cancelled.

    Just wondering if this might make a difference to my prospects of attaining self-employed status (even if my earnings are effectively zero for the next financial year)?

    Another option might be to wait until I turn 60 and then pay the Class 3 contributions retrospectively out of the lump sum.

    From what I have read this does seem possible. Am I assuming correctly?

    Finally, if I claim an early, actuarially reduced pension or wait until I am 60 to do so, do those who receive their Teachers’ Pension continue to pay NI until they can claim the state pension as well?

    Apologies for the naivety of these queries. I really haven’t grasped this whole territory properly.
  12. Rott Weiler

    Rott Weiler Star commenter Forum guide

    border_walker and diddydave like this.
  13. diddydave

    diddydave Established commenter

    Yes...perhaps I write as I talk rather than being grammatically correct as I thought that's what I meant by starting: "You can still pay..." and that the flow thereafter was clearly in response to a question on voluntary contributions but wanting to alert the OP to the need to correctly identify which category they would be in as from their initial post it looks as though this would be be the class they could be required to pay if they chose to pay them.
  14. eljefeb90

    eljefeb90 Senior commenter

    Hi @NoseyMatronType . You do not pay National insurance on your pension, only on paid employment over a minimal amount per week. It's £183 gross per week, which I doubt you will be earning. You do pay tax on the pension, obviously.

    Yes, you can pay class 3 contributions retrospectively but only from 2015- 2016 onwards. That was the year when the rules changed and public sector employees became liable to pay full national insurance rates and , in return, acquired a eligibility to receive a full state pension. I am presuming that you were working until relatively recently, so will already have paid several years at the higher rate, or did you leave teaching several years ago? Obviously, you can pay class 3 contributions in the years to come before you reach 66, or indeed, pay class 2 as an examiner.

    Finally, for what it's worth, I would hang on to my savings and claim the actuarially reduced pension and lump sum. You will be well into your seventies before you start to 'lose out'. If you wait 20 months , you will also miss out on the high inflation year of 2010, and , perhaps, 2011. They calculate your pension on your best three years in the last ten taking that year's inflation into account. Most salaries have been fairly static over the last decade so these inflation figures can really boost your salary of reference. I took ARB at the end of 2015 at 57 . My pension was reduced by 12%, but, since inflation had been 4 to 5 per cent in my three best years, my salary of reference got a 13.5 % boost.
  15. diddydave

    diddydave Established commenter

    If you are marking in the January series (and there may well be some available post September for appeal papers that students have been promised) you can still be an examiner/invigilator for this financial year.

    Being 'self-employed' is something HMRC want you to tell them as soon as you become that so that they can get you to fill in a tax return and get your tax correct. You can earn nothing being self-employed, in setting up my business I made losses in the first years. I imagine that HMRC won't look too kindly on someone who 6 years later asks to pay the NI as a 'self-employed' person if they didn't get notification that you were self employed in those years at the time!

    You can pay them retrospectively but again and you can do so at the cheaper class 2 rate if HMRC know that for those years you were one of those eligible to do so at the time.

    As for your pension you do not pay NI on it. If you are working as well then you pay NI on that income (if you earn enough etc)
    NoseyMatronType likes this.
  16. diddydave

    diddydave Established commenter

    eljefeb90 likes this.
  17. NoseyMatronType

    NoseyMatronType Star commenter

    Once again diddydave, thanks for your invaluable help.
  18. Rott Weiler

    Rott Weiler Star commenter Forum guide

    I must have misunderstood you becuasue I read it that you were concerned because the gov.uk page said that if "if you are "unemployed and not claiming benefits" you have to pay the class 3", ie that is mandatory to pay NI contributions if you are not working whether you want to or not.
  19. Piranha

    Piranha Star commenter

    This is a bit naughty (don't tell anybody I said it!) but does anybody actually check that your business exists? I have a tiny tutoring business with the aim of making my tax free £1,000 per year (gone above that this year so I will have to pay tax - bother!) and my few clients pay in cash. My only record is my spreadsheet of who pays how much on what date, from which I get a figure to put on my tax return. I pay my class 2 contributions from that. Who would know if I had no clients at all?

    That being said, I would recommend a little, selective tutoring to earn some tax free cash and keep the brain going, but I know this does not suit everybody. And when things return to normal, exam marking and invigilation are other ways of paying class 2 contributions.
    NoseyMatronType likes this.
  20. diddydave

    diddydave Established commenter

    All good, if there's a doubt it's good to point it out otherwise misconceptions can be developed.

    The important point is that when you call HMRC that you know which of the categories you *want* to be in...clearly one that qualifies you for class 2 rather than class 3 is pretty important and you definitely don't want to be telling them that you are 'unemployed and not claiming benefits' if you can be 'self-employed' or an 'invigilator or examiner' ;)
    Rott Weiler likes this.

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