Brits – are you paying National Insurance Contributions (NICs)?
Written by Jamie Bubb-Sacklyn on June 05, 2018.
If you’re reading this blog the chances are that you have at least thought about retirement planning and have some understanding about the importance of saving. Perhaps you have set some specific retirement goals, or perhaps that is one of many things on that never ending to do list!
If it is on the list, there’s no time like the present. Seriously, however old you are, now is the ideal time to think about how you are going to save enough to afford a comfortable retirement. It starts with making some concrete savings goals and if you’re young, time is on your side and compound interest is your friend. If this isn’t the case, fear not, starting now is far better than not starting at all.
The first thing that I do with clients when I sit down with them to set goals is to look at what they have already saved. Many Brits omit to factor into their calculations their UK state pension. While not huge, the UK state pension is the most secure pension income that you may be entitled to and, depending on where you finally decide to retire, it will could also increase in payment in line with inflation.
At present, the UK State Pension is £164.35 per week and, depending on whether you are a man or a woman and your date of birth, is payable from the age of 65. However, and as you are probably aware, the State pension age is on the up. Between October 2018 and October 2020, both men and women's state pension age will increase to 66. And between 2026 and 2028, it will rise again to 67. While having to work until we are older is not great news for many it’s the tradeoff we’re paying for increased life expectancy, so I guess we can’t really complain. A 65-year-old non-smoking British male in good health today is expected to live until 88, that’s 23 years in retirement! And for a healthy 65-year-old woman, this increases to 91…26 years in retirement!
Here’s a little detail on National Insurance Contributions (NICs) and why it may be important for you to continue paying them voluntarily, even while you are living abroad. I’m highlighting this because it is something that many people are not aware of. To qualify for any State Pension at all in the UK, you need to have 10 years of qualifying NICs and to qualify for the full amount you need to have 35 years of qualifying NICs. This increased from 30 qualifying years in April 2016. For each year of NICs that you have accrued, you are entitled to 1/35 x full state pension so if you have 20 years you are entitled to 20/35 x £164.35 = £93.91 per week.
If you’d like to check your state pension age, you can do that here.
And while you’re at it, have a look at your national insurance record here.
Now, £164.35 may not seem like much but don’t underestimate how crucial a part of your retirement planning it can be. This will provide a solid base of retirement income and if there are two of you receiving the State pension, basic household costs may already be covered from this alone. That said, I plan on having a far more enjoyable retirement than the future equivalent of £164.35 per week will allow so I’m making my own retirement arrangements and I would urge you to do the same.
If you would like help in creating a financial plan so that you can afford the retirement lifestyle of your choosing, please contact me at email@example.com.