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NI contributions and state pension


MrXxx

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Quick question that I can't seem to find a clear answer to so...

If monthly you earn above NI LEL you can get your NI contribution towards your state pension credited, and if you earn above Primary Threshold you have to pay 12% of salary to get the credit...fine with this...and if your salary varies from month to month as long as its either of these you will still get the credit for each month...

But what if you only worked for part of the year and didn't register unemployed for the other months (and so get credited for these other months)?..I.e if you went travelling or had seasonal work...

1. Could you be in a position where you don't have a full pension year although your total yearly earnings could be well above someone who did a full twelve months at the lowest primary threshold level?

2. And/or following on from 1., is there a minimum yearly qualifying sum irregardles of how many months that you have worked that then entitles you to a full years pension credit?

Sorry for the length but the specifics are an important part of the questions (and hopefully getting the right answers).

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My understanding is that is is an annual calculation -- that is, you have to have an annual accumulated contribution > the minimum amount to get a qualifying year.

The minimum annual contribution changes year by year -- about £6k atm.

[note, this is different to the actual NI payments, which are worked out by employment period (month), and (unlike income tax) there is no rebate/bill at the end of the year to sort it all out because of strange irregular income*.]

Specifically:

1. No.

2. Yes.

[AFAIKT]

[* apart from company directors, because they're special]

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Say you worked seven months, you could top up the other five months with voluntary class 3 to get your qualifying year. In that example about three hundred quid for the missing 5 months.

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On 16/01/2019 at 18:21, dgul said:

My understanding is that is is an annual calculation -- that is, you have to have an annual accumulated contribution > the minimum amount to get a qualifying year.

The minimum annual contribution changes year by year -- about £6k atm.

[note, this is different to the actual NI payments, which are worked out by employment period (month), and (unlike income tax) there is no rebate/bill at the end of the year to sort it all out because of strange irregular income*.]

Specifically:

1. No.

2. Yes.

[AFAIKT]

[* apart from company directors, because they're special]

Do you have a source/site for this figure, as this is what I have been unable to find?

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Chewing Grass
On 16/01/2019 at 18:21, dgul said:

My understanding is that is is an annual calculation -- that is, you have to have an annual accumulated contribution > the minimum amount to get a qualifying year.

That is unfortunately wrong as Mrs Chewy found out last year although she earned above LEL (just) for the year.

Checking up it is calculated on the pay cycle either monthly or weekly.

The LEL is then divided by that cycle and in the case of weekly paid is currently £116 per week.

If a week/month is low i.e. under £116 for weekly paid a credit is not earned.

This means the wage earner then gets a partial credit for the year which does not equate to a full years pension contribution and is not credited with a year.

The option is then available to make the credit year up with a voluntary contribution (which is worth doing) but this is not widely publicised.

This option is only retrospectively available IIRC for 5 years.

Edit:  You can do it here  https://www.gov.uk/check-state-pension

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11 hours ago, Chewing Grass said:

That is unfortunately wrong as Mrs Chewy found out last year although she earned above LEL (just) for the year.

Checking up it is calculated on the pay cycle either monthly or weekly.

The LEL is then divided by that cycle and in the case of weekly paid is currently £116 per week.

If a week/month is low i.e. under £116 for weekly paid a credit is not earned.

This means the wage earner then gets a partial credit for the year which does not equate to a full years pension contribution and is not credited with a year.

The option is then available to make the credit year up with a voluntary contribution (which is worth doing) but this is not widely publicised.

This option is only retrospectively available IIRC for 5 years.

Edit:  You can do it here  https://www.gov.uk/check-state-pension

This is my understanding...so irregardless of how much (in£) NI contributions you have made over the tax year, if you have missed months for whatever reason (see original post) and haven't received a credit for them you do not have a qualifying year...have I got this right?

...and if so, the only way of getting one is to pay additional contributions (type depends on employment status I.e paye/self emp) at the end of the year.

...if this is correct it seems illogical to me, as a low paid permanent worker paying lower NI contributions in to the system could be better off than a higher paid temporary worker who could potentially have paid a greater sum in NI yearly contributions but gets nothing for the year?!

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Chewing Grass

Yep, that about sums it up so it is worth occasionally checking how many teeth are in the proverbial horses mouth via the link.

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