From 2018 Class 2 NICs will be abolished.
This has impact on how you accrue qualifying years for state pensions if you are self employed and your earnings are below 5,965 per year.
Whereas before you could pay voluntary class 2 NICs at 2.80 a week even if you had very low income and still qualify for state pension from 2018 you have to think of other options.
Under some circumstances you can qualify for National Insurance credits. For example if you already receive some benefits such as working tax credits you may qualify for NI credits. If you don’t qualify though your only option may be to pay Class 3 voluntary contributions at £14.10 a week. Or nearly 5 times as much as you are paying now.
Ouch…
To illustrate this with an example:
If you are aged 43 and want to retire at 65 you have 22 years x 52 weeks x 14.10 equals £16,130 total contribution before you retire vs what you would have paid under class 2 NIC – £3,203
Smells like a sneaky way to increase the burden on the worse off under the cover of tax simplification.
And if you happen to wonder how much your state pension will be if you do make it to retirement – well the maximum state pension is £155.65 a week assuming you have 35 qualifying years. You get 4.45 per week for each year of contribution. You need minimum of 10 years to qualify. Say you have only 22 qualifying years instead of 35 – bad news – you will only get £98 per week.
A very detailed description of what is in store for you can be found on the government website here.
