Can you still get a state pension if you earn too little to pay NI? Our retirement Agony Uncle Steve Webb answers your questions
This is Money recently wrote: 'At present, workers juggling a number of low-paid jobs can avoid National Insurance if the amount they earn from each is below the threshold of £672 a month.'
If you are one of the above and avoid paying NI, do you get free NI credits from HMRC to go towards a state pension? Or do you not receive a state pension and/or other benefits because you haven´t contributed?
Where does one stand?
Low earners: Can you get a state pension if you don't make enough to reach the threshold for paying National Insurance
Steve Webb replies: If you are a low-paid worker with one or more jobs, the two important numbers you need to know are £112 per week and £155 per week.
The figure of £155 per week is called the ‘Primary Threshold’ for National Insurance Contributions. Above this level of earnings you have to pay National Insurance Contributions (NICs) and you build up rights to contributory benefits such as the state pension, employment support allowance and jobseekers allowance.
Between £112 per week and £155 per week you do not have to pay any NICs, but you are credited into the system as if you had paid.
But if you earn less than £112 per week you neither pay NICs nor are credited into the system. If you fail to contribute for a significant number of years, you may find that you do not get a full state pension at retirement.
One important point to bear in mind is that National Insurance is levied per job, rather than being based on your combined earnings from all of your jobs.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
So if you had two part-time jobs each paying £80 per week, you would not pay any NICs nor be credited into the system, even though your combined earnings of £160 per week would be above the Primary Threshold.
However, all may not be lost in terms of National Insurance even for those who don’t earn more than the ‘Lower Earnings Limit’ of £112 per week in any single job.
One reason why someone might be only doing a limited number of hours is because of caring responsibilities, such as bringing up a child under 12 or caring for an elderly or disabled person.
In both of these situations you may be able to get credits towards your national insurance record.
Indeed, there is a long list of things for which you can get National Insurance credits, and full details can be found here.
Even if you are not earning enough to pay National Insurance and do not qualify for credits you can still take action to protect your National Insurance record.
There is a voluntary category of National Insurance Contributions called ‘Class 3’ and the cost of Class 3 contributions is currently £14.10 per week.
These can be particularly useful if there were some weeks during a financial year where you were working and paying NICs and others where you were not.
You can buy Class 3 contributions just for the missing weeks and build up a full ‘qualifying year’ towards your state pension or other benefits.
More details about Class 3 contributions can be found here.
It is worth bearing in mind that it will not always be worth filling gaps in your National Insurance record. If, for example, you already have the 35 years of full rate contributions needed for a full new state pension, extra contributions may not add anything to your pension entitlement.
If your reason for paying voluntary contributions is to boost your state pension record, it might be worth getting a state pension statement before doing so.
There is generally no rush to pay missing contributions as gaps can usually be filled several years after the event. More information on the deadlines for paying Class 3 contributions can be found here.
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