Class 1 NIC and qualifying years

[martinro]

Please could someone clarify the benefits, if any, of further Class 1 NIC once the requisite number of qualifying years towards the Basic State Pension have been accumulated.

If one is an employee and below State Retirement Age, I believe NIC will still be charged. I am sure I have seen a reference on either the DWP or HMRC web sites along these lines..."you will continue to make NIC into the general taxation fund, although no further pension benefits will be accrued".

There are probably good reasons for not drawing attention to this and it bugs me that I cannot re-visit this reference.

May be there is someone in the TaxationWeb community who knows the answer?

Thanks in advance,

Martn

[Peter D]

Goto www.gateway.gov.uk and register there. Then us the pesion calculation service to get an online quote for your state pension. This assumming you have your 39 years plus 5 free will give you the max pension to date. I beleive this value moves very little if at all once you have the magic 44 years contibutions but at least you will now have the baseline. I may have a more decisive anwser in 9 days as I am resolving this issue for another client who has retired early so the NI contributions have stopped. Regards Peter

[Peter D]

http://www.thepensionservice.gov.uk/approachingretirement/introduction.asp#gaps.

Very usefull and yes the over payment in years is of no value if you have hit the max.

Regards Peter

[martinro]

Peter, Thank you for your comments. I am familiar with both sites you mentioned and am a Government Gateway registered customer.

I think I have found an implicit rather than explicit answer to my original poser. "Understanding your State Pension Forecast" (May 2006) starts page 27 thus -
"Can I stop paying National Insurance contributions when I have earned a full basic State Pension?" '....you have to pay NIC until you reach State Pension age'. '....you do not need to pay any voluntary contribution.'

The implication is clear; once your have reached the 'magical' number, whilst contributions will continue to be extracted, these do not enhance your future entitlement to the basic State Pension. The focus is clearly on hitting the number and how to rectify any contribution shortfalls.

There used to be an idea that NICs relate to a social insurance fund. In reality, they are that element of direct personal taxation, applied to gross earnings, which is used to determine entitlement to some state benefits.

It seems feasible that early retirement and absence of current NICs may jeopardise entitlement to benefits, such as JSA and Incapacity Benefit, even though 100% pension has been accrued.

Although there are several elements to the pension forecast (basic, additional less COD and graduated retirement benefit), for contracted out people, I think the largest element will be 'basic'.

As you say, once the maximum entitlement has been earned, the forecast (in contant prices) is likley to fluctuate very little.

Regards,

Martin

[Peter D]

Your interpration is correct. As you have gathered there are several elements to the 'State Pension' and a very, very small amount is from total earning and those people who could make enhanced payments pack in 1876 to 79 from memory. You mention the effect of JSA. Well it may not apply to you but if someone is made redundant and they register as unemplyed the Job Centre pay that persons NI contibutions as long as he/she is signed on. They do not check to see if that person has topped out and therefore the added NI contributors are no 'contributory' The two departments are clearly funded form different purses and the NI account benefits from the overpayments.

Have you retired early like myself. ?? I have a very interest articly regauling topping of NI contributions and Topping up of a wifes NI's if running short. To cut a long story short, it does not pay to do so. Email me on Peter@3DAssociates.co.uk if you would like the article. I can not post it hear due to copyright. Regards Peter