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UK national insurance, my story
Old 04-23-2014, 03:13 PM   #1
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UK national insurance, my story

In my introductory thread, some time ago now, I mentioned that I was looking into my UK national insurance position, and someone asked me give an update on how I got on. It has taken me a long time to do so (apologies), but here it is.
I understand this won't be of interest to everyone.
I'm originally from England, but I have been living in New Zealand for about 15 years. As things stand, I would expect to receive a pension in New Zealand when I retire, but things can change. Australia has already introduced means testing on pensions. I would hate it if that happened here and my hard work and savings had been for nothing. I also don't like the idea of being confined to one country, due to other potential risks - civil war, worsening of our earthquake situation...
So I looked into my position in relation to UK national insurance. The great news was that there is a reciprocal agreement between UK and NZ. In the UK, you qualify for a pension by accruing 'qualifying years'. These are accrued by working and paying levies on income or by having exemptions. For UK citizens living in NZ, they can be accrued simply through residence in NZ, so I have been accruing them, and could retire in the UK on a UK pension, if I so wish (after continuing to accrue some more qualifying years).
However, there is a complication. Under another international agreement, UK citizens can receive their UK pension almost anywhere in Europe, and I (and my partner) like the idea of having all of those additional options, especially as house prices are cheaper in many other European countries than they are in the UK. But it is not possible to combine the benefit of these two agreements and receive the pension in Europe on the strength of residence in NZ.
Add another factor - I can even receive the UK pension in NZ, but in that case it will not be indexed (the value is frozen at the initial value) and it will be offset against any NZ pension. It could still be useful if the NZ pension becomes means tested.
But this, like retirement in Europe, is not available on the strength of residence in NZ. For either of these, I need to pay national insurance contributions.
I looked into this. There are two classes of voluntary contributions - class 2 for working people, or class 3, which cost about 6 times as much and confer fewer benefits, for non-working people.
I wasn't sure I would qualify for class 2, as one requirement was to have been working immediately before leaving the UK. I had had a gap of a few weeks. They used to be much stricter, and hardly allow a day in between work in the two countries, but I was very relieved to learn that I had qualified. I was able to pay six years in arrears, making the most of some of the working time I had already spent in NZ. And I already had a few qualifying years from my time in the UK.
So it has been a fairly happy ending. The contributions are very low, so it is worth paying them for a chance it may improve my future position. However, I will need to keep doing a little work in retirement to continue qualifying to make class 2 contributions. There is no monetary threshold on how much I have to earn to qualify, but I will have to earn something, and I won't push my luck my making it completely minimal. (I'm self-employed, so that is possible for me.)

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Old 04-23-2014, 03:28 PM   #2
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Join Date: Jun 2007
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Aspire - that's an interesting update. I too am currently paying Class 2 contributions (I live in the US and have done since 1995). By my calculations I need to continue paying these through 2029 to get my full 35 years of contributions in, but I am planning on retiring from full time work well before then. So like you I will have to continue to earn something to be able to continue to make those Class 2 contributions. Is there really no lower limit on what your earnings have to be to be considered self-employed? I am planning on earning somewhere around $10k a year for a few years after "retirement" so that shouldn't be a problem, but after that I was planning on scaling right back to almost nothing if possible.

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Old 04-23-2014, 03:36 PM   #3
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Thanks for saying it was interesting. I was afraid it might not be.
As far as I am aware, there is no lower limit. I have never seen any limit mentioned or been asked how much I am earning. And below is what I found online. It relates to people in the UK, but I inferred from that that there is no lower limit, and assumed it applies here too. The qualification level for compulsory contributions is quite low anyway, and I assume you can safely go a little lower, but I think they might challenge it if they found out that you were earning almost nothing. I don't really know.
If you have low earnings

If you earn less than 5,885 per year you can apply for a Certificate of Small Earnings Exception and not pay Class 2 National Insurance contributions. However, you might decide to carry on paying them voluntarily to keep your entitlement to the State Pension and other benefits.
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