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Not quite got 35 years of contribution for pension

(13 Posts)
pippop1 Fri 18-Jan-13 13:26:40

I'm 50 and have a little over 31 years of pension contribution. I do a little regular part time work from home on a self employed basis (nowhere near enough to pay tax).

I don't claim any benefits, am not job hunting and don't intend going back to work (was made redundant a couple of years ago).

If I get an accountant to organise my work as officially self-employed I believe this counts as paying National Insurance contributions (even though I don't earn enough to actually pay them) and therefore I can count the work towards the years and make it up to 35 years of NI contributions.

Does anyone know if this will work?
If not can one still buy "added years" to make it up to more than 35 years?

Dededum Fri 18-Jan-13 13:30:59

Listened to money box yesterday talking about pensions - thy said yes you can buy extra years and was something like 300 pounds for a year.

AnnoyingOrange Fri 18-Jan-13 13:38:06

Some useful info self employment from HMRC
www.hmrc.gov.uk/working/intro/class2.htm

pippop1 Fri 18-Jan-13 13:43:49

Thank you Dededum and AnnoyingOrange. I was confidently going along thinking I had my 30+ years and then they changed the goalposts.

AnnoyingOrange Fri 18-Jan-13 13:51:56
lougle Fri 18-Jan-13 13:53:17

So what you're saying, is that you are doing work 'unofficially self-employed' (ie. cash in hand) and now want to legitimise it to benefit you? hmm

AnnoyingOrange Fri 18-Jan-13 13:54:35

I did it a few days ago and noticed this:

Your estimate may include up to 3 years of automatic credits for the years containing your 16th, 17th and 18th birthdays. If you got your National Insurance number after April 2010 you don’t get these automatic credits

AnnoyingOrange Fri 18-Jan-13 13:56:08

Also you might consider registering as unemployed some time between now and when you reach pension age and get NI credits to make up enough years

specialsubject Fri 18-Jan-13 15:33:15

yes, you can still buy years. And you don't need an accountant to make you self-employed. If you meet the criteria (on the HMRC website) you can register as such (on the HMRC website). Set the date from the start of a tax year.

lougle - if OP is earning less than the tax threshold, he/she doesn't pay tax. Perfectly legit. That's me, too.

My opinion (and it is only that) re top-up contribs if you are only 50 is DON'T. Because the number of qualifying years went DOWN a few years back and they are now proposing that it goes up again. Before you reach your pension (if you ever do, the date keeps retreating) one or more of the next umpteen governments may change the rules again. If you contribute too much, you do NOT get it back. If you end up near retirement and are short on years, pay up then.

I think that the 35 year thing is only a proposal at the moment.

lougle Fri 18-Jan-13 15:40:12

"lougle - if OP is earning less than the tax threshold, he/she doesn't pay tax. Perfectly legit. That's me, too."

No, it's not. If you are self-employed you have to register within 3 months, whether or not you are liable for tax.

MrAnchovy Fri 18-Jan-13 16:58:48

"lougle - if OP is earning less than the tax threshold, he/she doesn't pay tax. Perfectly legit. That's me, too."

No, it's not. If you are self-employed you have to register within 3 months, whether or not you are liable for tax.

This is not true.

Firstly there is no 3 month rule any more, if you need to notify HMRC of a new source of income you must do this by 5 October following the end of the tax year. However if you are liable for Class 2 NI contributions you must notify immediately.

But you have to notify HMRC if you have income on which tax is due: if you are below the Small Earnings Exemption for Class 2 of £5,595 and have no other income which takes you over the Personal Allowance there is no obligation to notify.

Back to the OP - I would not condone the artificial creation of a self employment registration where there was no real business; in any case HMRC could decide that you are not in fact in business and remove your registration retrospectively.

Class 3 contributions are the correct way to "buy" extra years, albeit that they are more expensive than Class 2s and qualify you for a lesser range of benefits.

I agree with specialsubject, a lot of water goes under the bridge before you retire so I would get a current statement (why bother with the calculator of what you might have accrued in theory when you can get an exact personal statement?) and wait until any changes become real.

MrAnchovy Fri 18-Jan-13 17:02:22

Gaah, could have done with some formatting...

"lougle - if OP is earning less than the tax threshold, he/she doesn't pay tax. Perfectly legit. That's me, too."

No, it's not. If you are self-employed you have to register within 3 months, whether or not you are liable for tax.

This is not true.

Firstly there is no 3 month rule any more, if you need to notify HMRC of a new source of income you must do this by 5 October following the end of the tax year. If you are liable for Class 2 NI contributions I think you are supposed to notify immediately, but I'm not sure if there is any penalty - I've never heard of one being enforced.

But you only have to notify HMRC if you have income on which tax is due: if you are below the Small Earnings Exemption for Class 2 of £5,595 and have no other income which takes you over the Personal Allowance there is no obligation to notify.

Back to the OP - I would not condone the artificial creation of a self employment registration where there was no real business; in any case HMRC could decide that you are not in fact in business and remove your registration retrospectively.

Class 3 contributions are the correct way to "buy" extra years, albeit that they are more expensive than Class 2s and qualify you for a lesser range of benefits.

I agree with specialsubject, a lot of water goes under the bridge before you retire so I would get a current statement (why bother with the calculator of what you might have accrued in theory when you can get an exact personal statement?) and wait until any changes become real.

specialsubject Fri 18-Jan-13 22:32:42

thanks. Always good to have it confirmed that what I read on the HMRC site is right, and I am not breaking the law. smile.

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