Worked in UK for a while, moving back to the rest of the EU, voluntary NI?

[shimrod]

I'm Croatian, I worked for 8 years in Croatia, and 2 full years in the UK.

I'm now planning to move back to Croatia, and I'm trying to figure out the best thing to do with my UK National Insurance record.

In the tax year I started working in the UK (2016/17), I didn't meet the threshold for it to be counted as a full NI year. The online tax account is saying I can make up the shortfall for about £400. Does anyone know how this shortfall is calculated, exactly, in this situation: some earnings, some NI contributions, but not enough? It's not (52 x Class 3 contributions for 2016/17), it's not (52 x Class 3 contributions for 2016/17) - (NI already paid), it's not (52 - (earnings / Primary Threshold for 2016/17) ) x (Class 3 contributions for 2016/17)... Not that important, but I'm curious.

More importantly: considering a year of state pension is about £250 per year, a one time cost of £400 seems like an amazing deal.

This then led me to looking into voluntary NI contributions going forwards. My understanding is that, working in the EU, I could apply to pay Class 2 voluntary NI at £3 per week, so another £156 would get me £250 per year. That really seems to good to be true, so I suspect I'm misunderstanding something.

I expect that this is a fairly common situation if generalised as: worked in the UK, moving to work in the EU. But I've found it really difficult to find a reliable source that clearly explains how it would work out, or real world experiences except this gentleman, for whom it seems to have worked out very well.

If anyone has a good source or a good understanding of this, I would be very grateful for your help.

[daverobev]

I think it is just a certain amount per week for Class 3 - a flat rate, roughly £15 a week. So all the weeks you didn't work, you'd have to pay £15.

At the moment you would be able to 'port' your UK years back to Croatia, they would count as Croatian years - but that is EU stuff, and/or subject to the Double Taxation Agreement.

You have to have at least 10 years of UK contributions to get anything at all from the UK. I would just let it go (port the years when you retire, if it is possible, and if you haven't maxed out whatever the Croatian pension system is).

You can't just pay class 2. You have to have paid in to the UK for a few years already. If you're self employed in the UK, then you can pay class 2. I've written to them a couple of times (while I was living in Canada) asking if - as I was self employed! - I could pay class 2. No. They only let me pay class 3 (which I declined to do).

Over a ~40 year timespan you are better investing the £750 a year class 3 would cost. Of particular risk is that they reduce the UK state pension going forwards (demographics -> it's likely). If you were retiring in a few years, in good health, and already had ten years? Then yeah, maybe.

[shimrod]

I think it is just a certain amount per week for Class 3 - a flat rate, roughly £15 a week. So all the weeks you didn't work, you'd have to pay £15.

That also doesn't fit the amounts, but the closest fit (but not exact: within £2) seems to be:

(no. of weeks I didn't work) x (£14.10 weekly rate for 2016/17) - (NI contributions I did make through PAYE)

Croatian years should count against the UK 10 year minimum (but the amount should be based on just the 2 years I worked in the UK).

https://www.gov.uk/new-state-pension/living-and-working-overseas

Example

You have 7 qualifying years from the UK on your National Insurance record when you reach State Pension age.

You worked in an EEA country for 16 years and paid contributions to that country’s state pension.

You will meet the minimum qualifying years to get the new State Pension because of the time you worked overseas. Your new State Pension amount will only be based on the 7 years of National Insurance contributions you made in the UK.

(I'm assuming that whatever the post-Brexit agreements are with EEA, they won't be worse than what's now in place with with Bosnia or Serbia.)

You can't just pay class 2. You have to have paid in to the UK for a few years already.

Right, it's 3 years.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/759966/NI38.pdf

You can pay Class 2 NICs if you are employed or self-employed
abroad and if you satisfy the following conditions:
• you have lived in the UK for a continuous 3-year period at any
time before the period for which NICs are to be paid - (if you
have lived or worked in another EEA country or in Turkey, time
spent there may help you to meet this condition)
• before going abroad you paid a set amount in NICs for 3 years
or more (this will be checked when you ask to pay Class 2 NICs)
• immediately before going abroad you were ordinarily an
employed or self-employed earner in the UK

If time spent in another EEA country counts, I already satisfy 1). I could possibly satisfy 2) by paying the voluntary Class 3 £400 for 2016/17, or by staying in the UK enough to qualify. If I don't unexpectedly lose my job before I leave, I satisfy 3).

Did you satisfy these 3 when you were applying for Class 2 from Canada?

Where I'm unsure if I qualify is that I'm not clear if you can pay Class 2 or Class 3 from the EEA: there's a lot of language saying you don't have to pay NI from the EEA, since EEA working years count for things like the 10 year minimum, but it's not clear (to me) if you are allowed to pay to increase the actual amount of UK pension.

Over a ~40 year timespan you are better investing the £750 a year class 3 would cost. Of particular risk is that they reduce the UK state pension going forwards (demographics -> it's likely). If you were retiring in a few years, in good health, and already had ten years? Then yeah, maybe.

Yes, at 5 times the cost, Class 3 is a lot less attractive.

[daverobev]

I thought I should qualify, but they said no. Possibly because of "immediately" - I spent about a month in Scotland after quitting work doing a course before I left the UK. But when I've requested to pay class 2 they send me a sheet with the class 3 amounts. So, dunno.

I think there is a possibility you can't pay class 2 when in the EEA because you can only pay social security contribs in one place - but I really don't know.

I would call them and ask, or write.

[shimrod]

Quite possibly because of "immediately": I've read somewhere (can't find it now) that that's interpreted as "a week".

I plan to talk to HMRC regardless, but it seems like a common enough situation that I'm hoping to find people who already have experience with it.

[Rinch]

My situation is slightly different but maybe it's helpful. I worked in the UK for 5 or 6 years before moving abroad to Switzerland. I applied to pay voluntary class 2 NICs as it looked like a good deal to me. I now have about 15 years worth of contributions as well as being in the swiss system. HRMC set up a direct debit and bill me periodically from a UK account.

I assume that this will give me an additional UK state pension when i reach retirement age. I know they might end voluntary class 2 contributions at some point or reduce (abolish?) the state pension so this is not without risk. At that point I can either pay class 3s or stop paying and accept a partial payment when retirement comes. 

The only way to know whether you qualify is to apply and see what happens. the form is here:

 https://www.gov.uk/government/publications/social-security-abroad-ni38

In your case I think the main risks are not getting to 10 years before they abolish the voluntary class 2 contributions. In addition to the same risk we all face that the pension age will be raised or the payments reduced to the point where it's worth very little.