What happens once you have paid up your NI years?

[KingSatsuma]

I will have paid up all my NI contributions (35 years) by age 62. I am planning on working past this.

What happens then? The info seems vague. There are lots of "may" affect your entitlements if you don't carry on paying it.

If I have paid up, I then want to take that money and put it in a private fund. Also, what about your employer? Once you reach 35 years, do they still have to pay it?

I get the impression you don’t really know what you’re talking about.
NI isn’t a personal savings scheme to draw on when you retire. Someone on minimum wage whos fully paid up will get £10k a year for the rest of their life. My granny lived to 101, so got her pension for 41 years - at today’s rate that would be £410K which if far far more than she ever paid in.

All income after retirement is potentially taxable. So most of my private pension will be subject to tax as my total income will be approx £25k a year. I have no problem with that.

Drawing down from a savings pot can attract tax payments in the same way.

You're not paying into a pension pot of your own, you're paying NI to the state to pay for the pensions of people currently retired.

It is National Insurance.

You are contributing to the state.

The payments into the pension are untaxed, and then you get taxed when you are in receipt of the pension.

If you save, it will be taxed income.

So you can put e.g. £100 into a pension, or you can pay tax on £100 and put what remains into a savings account.

You pay your money, you take your choice.

My pension forecast says if I pay another 8 years out of my 15 years remaining till I am 67, I will get the full amount.

You probably only have 28 full years that count then?

Is the state pension excluded from the personal allowance for tax reasons or is it just added to any private pension?

There will be people paying NI for the best part of 50 years if they work continuously from 18. Equally there will be many people not far off retirement age now who don't actually have the full 35 years contributions because of the old opt out system. Some of those opted out and just benefited from lower NI at the time but now find they need to pay for more than 35 years to qualify for a full state pension and others had that diverted into a private pension so whilst their state pension will be lower their private pension will be higher as a result. You don't get to stop paying NI until you retire, regardless of how many years contritions you have.

I get the impression you don’t really know what you’re talking about.

Err, thanks soon to be 60 😐

I'm probably more "on it" than most people.

I know it is not a pot of money to draw down on. I know it is a massive black hole we pay into and don't get anything from it if you die, like my mum who died late 50's. I have a file permanently open in my admin with a complete up to date NI projection in it. I did this because I lived out of the UK for many years, and then paid back 6 years of what I owed to bring it up to date. I then signed up to child benefit when I was a SAHM and ticked the box to decline the money as we were outside the boundaries of claiming. I went back to work the month my smallest DC turned 12 and have paid NI since then. I am now up to date with my NI contributions and know what I have to pay, and I am paying as much into my private pension as possible.

My original query was actually, if I have paid up NI of 35 years, do I still have to pay NI, which some of you have answered, thanks. If I didn't have to pay NI after 35 years and it was voluntary, I would divert it elsewhere. It is not 100% clear on the website.

You're not contributing to your pension, you're contributing to the pensions of current pensioners.

When you retire, your state pension will be paid from the NI of younger people in work.

I started work at 17, and didn't get my state pension until I was 66. I was paying NI for 47 years, and it would have been 49 years if I hadn't gone to college f/t for 2 years. I still get the same pension as someone who's only worked for 35 years!

I only get a few pounds a week more than my MIL, who only worked for 18 years and gets pension credit.

You keep paying! My retirement ages means I am forecasted to pay bloody 50 years!

Obviously those who are older now & still working past their lower retirement age don't pay it which is stupid.

and it may not necessarily be just your pension you are paying for, but also funding todays pensioners.

It's not your pension you pay for it's the older people now you pay for hence why the age is going up, there isn't enough young people to old people.

National Insurance is basically tax and it would be a lot clearer if the government rolled it into income tax. You earn money above the thresholds you will pay NI until you retire.

I'm in my early 40's, and have already got 25 qualifying years of NI contributions banked, as I started working part-time at 16 around school and uni, then I have worked full-time ever since.

Officially I only need to pay NI for another 10 years to reach the full 35 years NI contributions required, however due to my age I will actually be paying NI for another 25 years, assuming I continue working until retirement.

Whether you contribute NI for 35 qualifying years or for 50 qualifying years, you will receive exactly the same amount of full state pension.

Is the state pension excluded from the personal allowance for tax reasons or is it just added to any private pension?

@NewNovember

State pension isn't excluded from the personal allowance, it is treated as income just like any other. If you only receive state pension and no other income there will be no tax to pay as state pension is less than the personal allowance.

State pension is also paid gross, with no deductions i.e. you receive the full £10,600.20.

The personal allowance is currently £12,570.

The difference between personal allowance and state pension = £1,969.80.

If you earn income/have a private pension in addition to your state pension, of over £1,969.80, you need to complete a self assessment tax return so HMRC can calculate the tax to be paid.

National Insurance is basically tax and it would be a lot clearer if the government rolled it into income tax. You earn money above the thresholds you will pay NI until you retire.

but pension payments are taxable but not subject to NI. Many people receive pension payments below SPA.

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do you really not understand that state pension and NI is not your own little private allocation of money . It is, as it says on the tin, insurance . An insurance to protect you against being destitute in old age.

The qualifying years are minimum years to get that protection.

I’ll add to that,
HMRC cannot raise tax on state pension. But it is included in your income for calculation of income tax. It is, as this OP, says below personal allowance, so if all the income you get is the state pension, then you’ll be a nil rate tax band. With some allowance to spare

Once your income goes above personal allowance, including your state pension, you’ll then be taxed on the additional income . This might mean you need to complete a tax return, but if your ex employer is paying you a pension then it’s still PAYE. I have 2 employee pensions, and the HMRC tend to take tax PAYE from the bigger pension income and then no tax form the lower income pension. They tend to just work out what’s simplest in terms of where to collect the monies from with multiple PAYE sources.

I have completed occasional years as self assessed, but that becuase of other additional income from capital gains, dividends etc . But most years I don’t need to and they don’t ask me to. All PAYE .

It is a weird one but did you know you get an NI allowance per job. I have 3 jobs and pay tax in all of them. They split the tax allowance. I only pay NI in one of them though as its the only one which pays over £242 a week.

Yep this is me. But it was opting out of the SECOND SERP. You’ve never been able to opt out of state basic pension.
so, although I had worked well past 40 years, I had to make a couple of years voluntary contributions to receive the new state pension full amount. I ve just done that to ensure I get the max possible that I can. But there are people , older than me, that will have bigger state pension becuas3 they get the second SERP elements.
that 2 tier system was replaced in order to simplify things. It will eventually, but right now it’s a complete shit show where people are finding they’re short of contributions despite working all the qualifying years needed.

everyone needs to check their actual forecast on line, folks

But the state pension is just a benefit. What exactly would someone be expected to live on otherwise?

I’ve already paid 42 years worth and will need to continue paying for another 7 years. It’s just how it is.

@Whiteroomjoy that's interesting about PAYE deductions on your private pension.

Given that the personal allowance can only be used once, do your private pension providers assume you have already used the personal allowance against your state pension and therefore tax your private pension at basic/higher rate?

No, they don’t assume anything. I was given emergency codes by employers on retirement based on knowing the pension they’d give me and state pension. In effect they both applied the balance of my personal allowance net state pension income simultaneously.
, once my pensions started coming in on regular basis ( 2-3 months) I did as I was advised. I called HMRC and asked them to review and correctly set my code for each of my 2 ex employers ( pension providers). One is a tiny pension so they tax that at basic rate entirely, my other pension has tax code that consumes rest of my personal allowance above my pension income, and then tax basic rate on balance. I then obviously needed to pay additional tax for the first few month I’d underpaid given birth companies had applied the remaining bit of my allowance. So, it took about 9 months to settle down, and a few helpful calls with HMRC to check it was working out ok.

What I meant is that they ( HMRC) don’t split the remaining personal allowance over both pensions even when they do figure out what allowance is left. , it’s far easier to tax one pension in its entirety and use remaining allowance balance against the other, then tax the balance on that one
my two pension providers don’t know what I’m getting in terms of income overall, they couldn’t even guess my tax code, HMRC needs to tell them. Hence why most people (all?) get an emergency code the employer uses until they get told by HMRC the actual code.

Thanks for that explanation @Whiteroomjoy, I didn't know that, it makes sense.

I suppose real-time information makes issues like this much easier to rectify in the year, given they'd have had to wait until the end of the tax year previously, you'd have thought it would have been quicker than 9 months!

OP, change to working several jobs, each of which paying below £242 a week and you’ll pay no NI but get the credits. (One job would need to pay more than £123 per week to get the credits.)