[Misc] Retirement

[Birdie Boy]

Can you point me in the direction of where I need to look to find out about paying NI when abroad?
Moved to Falklands originally for 3 years and never bothered doing it. Now it looks like we will be settling here I want to top up in case we ever need to move back.
Thanks

I have been told that if there is no uk income, you can pay class 2 NI which is £180 per year. Apparently hmrc try to get you to pay class 3 but you do not have to. I also read that to do class 2 you may have to do a self assessment and put yourself down as self employed too get the class 2 NI. I am back in UK end of the month so will call hmrc to clarify and pay last years NI.

 

[BLOCK F]

Which fund / product in particular? They seem to put their name to a few different ones.

On the topic of IFAs, I’ve bitten the bullet and arranged a free initial consultation with one. I went through the unbiased.co.uk which aims to put you in touch with a shortlist of IFAs who apparently match your needs.

It will take some convincing for me to part with a chunk of cash but I’ll wait and see what they say. My prejudice tells me that IFAs are wide boys who take advantage of the ignorant and gullible to cream off a big slice of their savings… but I’m happy to be put right. If a consultation helps me form a concrete strategy that's less hit and Miss than my current approach, it may just be worth it.

I’ll report back in case it helps others.

Polar Capital Technology.

 

[Professor Plum]

I have been told that if there is no uk income, you can pay class 2 NI which is £180 per year. Apparently hmrc try to get you to pay class 3 but you do not have to. I also read that to do class 2 you may have to do a self assessment and put yourself down as self employed too get the class 2 NI. I am back in UK end of the month so will call hmrc to clarify and pay last years NI.

Allocate a fair amount of time to this task. Maybe things have improved but when I last called them, about a year ago, it took about a week of calling every day to finally get through to speak to someone. If I remember right, I hit on the idea of calling first thing in the morning, and got through relatively quickly. They were very helpful once I'd finally made it through but it was quite a saga.

 

[Paulie Gualtieri]

My online account shows I made full contributions from 16 years of age onwards….I didn’t have a proper full paid job until I graduated.

Just checked mine and same, have contributions from when I was working part time (but earning enough above the weekly minimum to pay NI)

I’m early 40’s and only have 6 more years to get the maximum £220 a week state pension (state pension goes up about £6.30 a week per qualifying year)

 

[Paulie Gualtieri]

Allocate a fair amount of time to this task. Maybe things have improved but when I last called them, about a year ago, it took about a week of calling every day to finally get through to speak to someone. If I remember right, I hit on the idea of calling first thing in the morning, and got through relatively quickly. They were very helpful once I'd finally made it through but it was quite a saga.

If you ever need to speak to HMRC call at 8am on the dot

 

[BrightonCottager]

I'll explain how I understand it. I did speak to an IFA and he didn't like my plan to take a max lump sum, but he didn't explain why. When I did some sums I I found what I think is an excellent reason.

First, the tax free lump sum is worth taking only if you are going to spend it quickly. If you have a good pension, one that grows with investment and is not a permanently fixed amount, and no need for a large sum of money, and expect to live a long time, it makes sense to not take any tax free lump sum, and therefore to maximise the monthly pension payment.

If you die soon after retirement and have a legal partner the pension pot is halved overnight (well, mine is) and Mrs T will get 50% of what I get. So another trick is to not die. If early death is likely then take the max lump sum you can when you retire.

The bigger the lump sum you take the more you reduce your nominal 'pot'. The pot is estimated on the basis of life expectancy and how much you have paid in. Of course if you happen to live to 120 the pension won't 'run out' so the pot is relevant only in terms of how much it is reduced when you take a lump sum, and how big the lump sum you take.

By taking a lump sum, my annual pension payment drops from X to Y. Therefore X-Y, let's call it £10,000, is the amount of pension payment I will lose per annum by taking a lump sum.

If we assume that the pension won't increase because inflation will be zero, then after a certain number of years (Z), you will have lost out £10,000Z. When £10,000Z equals the lump sum you took when you retired, you have reached a point where you are now losing out, in as much as the cumulative loss from your reduced monthly pension payment has exceeded the lump sum.

I did the calculation and found that if I took the max possible lump sum, I would be 85 years old by the time Z years had been reached.

It isn't quite as simple as that because there will be inflation and my monthly payments will increase due to this, but as a quick and dirty calculation it is accurate.

If I do what's planned and help my son buy a place to live using the lump sum, its value will of course grow as property prices increase. Plus my son will have a rather low mortgage. So the family gains. As far as I can see doing this is a no brainer.

Also this manoeuver will only be tax liable if the gift exceeds a certain amount. I am not sure what it is but it is certainly more than I plan to give. I read recently the threshold is £350K. I am sure an expert can correct me.

I personally won't be able to gorge on drugs, guns and hoes, but that's probably for the best.

Thank you very much for this clear explanation. It is what I was thinking. When I got 'early release ' from a government agency which used the Local Government Pension Scheme, I was able to choose the lump sum / pension option. I went for min lump sum & max pension because at the time I was only in my mid 50s and was intending to work again part time and didn't need a big lump sum. I'm glad I did because the pension rose with inflation, unlike my salary. I'm now in another pension scheme and will have to make the lump sum / pension decision again in a few years when my priorities will be different (I quite fancy another hoe) and lifespan shorter.

 

[dazzer6666]

I'll explain how I understand it. I did speak to an IFA and he didn't like my plan to take a max lump sum, but he didn't explain why. When I did some sums I I found what I think is an excellent reason.

First, the tax free lump sum is worth taking only if you are going to spend it quickly. If you have a good pension, one that grows with investment and is not a permanently fixed amount, and no need for a large sum of money, and expect to live a long time, it makes sense to not take any tax free lump sum, and therefore to maximise the monthly pension payment.

If you die soon after retirement and have a legal partner the pension pot is halved overnight (well, mine is) and Mrs T will get 50% of what I get. So another trick is to not die. If early death is likely then take the max lump sum you can when you retire.

The bigger the lump sum you take the more you reduce your nominal 'pot'. The pot is estimated on the basis of life expectancy and how much you have paid in. Of course if you happen to live to 120 the pension won't 'run out' so the pot is relevant only in terms of how much it is reduced when you take a lump sum, and how big the lump sum you take.

By taking a lump sum, my annual pension payment drops from X to Y. Therefore X-Y, let's call it £10,000, is the amount of pension payment I will lose per annum by taking a lump sum.

If we assume that the pension won't increase because inflation will be zero, then after a certain number of years (Z), you will have lost out £10,000Z. When £10,000Z equals the lump sum you took when you retired, you have reached a point where you are now losing out, in as much as the cumulative loss from your reduced monthly pension payment has exceeded the lump sum.

I did the calculation and found that if I took the max possible lump sum, I would be 85 years old by the time Z years had been reached.

It isn't quite as simple as that because there will be inflation and my monthly payments will increase due to this, but as a quick and dirty calculation it is accurate.

If I do what's planned and help my son buy a place to live using the lump sum, its value will of course grow as property prices increase. Plus my son will have a rather low mortgage. So the family gains. As far as I can see doing this is a no brainer.

Also this manoeuver will only be tax liable if the gift exceeds a certain amount. I am not sure what it is but it is certainly more than I plan to give. I read recently the threshold is £350K. I am sure an expert can correct me.

I personally won't be able to gorge on drugs, guns and hoes, but that's probably for the best.

This is a great example of why many of us need to take advice………much of what you say wouldn’t be applicable in my case due to the type of pension etc. It’s horrifically confusing and the potential cost of a ‘wrong’ decision could be very significant.

Where did you get the £350k figure from incidentally ? I didn’t think there was a limit on gifts to family (assuming it is a gift) and inheritance tax wouldn’t be payable providing you survive 7 years after making the gift.

 

[Harry Wilson's tackle]

This is a great example of why many of us need to take advice………much of what you say wouldn’t be applicable in my case due to the type of pension etc. It’s horrifically confusing and the potential cost of a ‘wrong’ decision could be very significant.

Where did you get the £350k figure from incidentally ? I didn’t think there was a limit on gifts to family (assuming it is a gift) and inheritance tax wouldn’t be payable providing you survive 7 years after making the gift.

The 7 year thing doesn't apply below a certain amount (in the £300K band). Someone posted a link to the Martin Lewis web page that mentions this.

 

[AZ Gull]

You only need 31 years of NI contributions (I think) to get the maximum state pension so you may not need to pay all the missing years.

It is 35 years.

I currently have 13 full years (a further six years were incomplete when I was in full-time education).

I therefore have a lot of catching up to do, and 13 of those potential catch-up years will disappear forever next April.

 

[Daddies_Sauce]

It is 35 years.

I currently have 13 full years (a further six years were incomplete when I was in full-time education).

I therefore have a lot of catching up to do, and 13 of those potential catch-up years will disappear forever next April.

This is not true, many are under the transition rules, I had to have 50 years of full contributions to be able to receive the full SP, which started this year.

 

[Herr Tubthumper]

Can you point me in the direction of where I need to look to find out about paying NI when abroad?
Moved to Falklands originally for 3 years and never bothered doing it. Now it looks like we will be settling here I want to top up in case we ever need to move back.
Thanks

There is stuff on the HMRC website but it’s not super clear. https://www.gov.uk/pay-class-2-national-insurance/if-you-work-or-live-abroad#:~:text=You%20may%20be%20able%20to,country%20you're%20working%20in

I was in the same situation as you, called the HMRC, filled out a form, waited for quite a while and eventually got notification of the direct debit for 13 pounds a month. I called to chase them up as well. Took a few months but I now pay a monthly DD and get an annual statement. Wife did the same.

You mention “in case we ever need to move back.” - I believe you can claim your pension from abroad.

 

[dazzer6666]

The 7 year thing doesn't apply below a certain amount (in the £300K band). Someone posted a link to the Martin Lewis web page that mentions this.

I don’t think that’s right……..there are however several permitted ways of gifting outside of the 7 year rule

 

[Harry Wilson's tackle]

I don’t think that’s right……..there are however several permitted ways of gifting outside of the 7 year rule

I should probably look it up....

 

[loz]

The trouble with gifting is that if one of your children divorce isn’t their partner entitled to 50% ?

 

[dazzer6666]

I should probably look it up....

How Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.

www.gov.uk

 

[Weststander]

I should probably look it up....

Survive 7 years post gift of cash and all is good. Even before that, what’s the worst that could happen, some IHT payable (tapered lower) on your estate. Never falling on your son to pay.

[Subject to @dazzer6666 vetting my post ].

 

[dazzer6666]

The trouble with gifting is that if one of your children divorce isn’t their partner entitled to 50% ?

Depends entirely on how your offspring structures their finances (and their divorce settlement)

 

[dazzer6666]

Survive 7 years post gift of cash and all is good. Even before that, what’s the worst that could happen, some IHT payable (tapered lower) on your estate. Never falling on your son to pay.

[Subject to @dazzer6666 vetting my post ].

I’m using the simplest of all strategies to avoid any IHT

 

[Weststander]

I’m using the simplest of all strategies to avoid any IHT

Spending? LOL

PET’s are obvious, always have been, yet rarely get mentioned in discussions. Instead complex structures, insurance policies, trusts, use of expensive lawyers.

I’m guessing the wealthy don’t trust their offspring with huge sums of their cash, long before they leave this mortal coil?

 

[Doonhamer7]

Mr amateur (so you need to do your own check) here but this is what I’ve picked up in my research:
1. Delaying state pension - you need to do your calcs of money in banking it vs increase in pension. A friend of mine did this and ended up putting his state pension into his SIPP getting the tax back it rather than leaving it and getting more from govt.
2. tax free element - I don’t think you have to take in one go you can take it on regular steps (but this needs planning ), I’m thinking about going to take £12.5k/year (or whatever 0% bracket is at retirement) out of my SIPP pot until I’m 65/67 when final salary / state pension kicks in, then I was going to tax free in crystallised slithers. All about getting most out of not paying tax. also I think you can leave your pension free of inheritance tax to your kids (but I’ve not looked into inheritance yet). I think this is where you need IFA.
3. There are a lot of good passive funds paying very low fees, vanguard, blackrock (iShare) etc and they can out do active funds which have larger fees. Things to watch are platform fees as well as fund fees as well as IFA mgt fees (i personally wouldn’t use an IFA if your just doing passive funds)
4. I looked at St James Place and talked to a couple of their non-IFAs - by god were they arrogant. The four colleagues I talk at work about finance / money (all retiring by 58) wouldn't go near them (So I have probably got subconscious bias against them), 2 friends are currently moving their funds out of SJP. But I have another friend who swears buy them - so who knows.
5. I have both Freetrade and Trading 212 accounts for ETFs and drip feed cash in to slowly (if we don’t go for a curry I put the £50-60 we would have spent into these apps and buy shares) to build my own share portfolios (I have a dividend fund which looks for large dividend payers (no morals here big oil, finance and cigarettes payout well!)) and a growth fund (tech, It, AI, biomedicine) - makes it a bit of fun as watching ETFs are boring). Morningstar and Yahoo finance give lots of free info On companies
6. Warren Buffet has said the 8th wonder of the world is compound interest and all anyone without time should do is use ETFs with automatic reinvest. He preaches what he says as Berkshire Hathaway doesn’t play dividends as it reinvests to maximise power of compounding
7. watch your company pension, it might have very few funds which probably aren’t the best (mine only had 10 to chose from out over of over 5000+ in the market), it may start ‘retiring you early’ so starts moving your pension pot into bonds and cash earlier than you want - will depend on your risk profile. I therefore moved most of mine into a SIPP so it could use more funds (my IFA manages this now). The bit i left in the company pension (to keep getting company pay outs) - I set my retirement age to 75 to keep it all in shares.
8. Stuck my emergency cash fund into premium bonds after getting taxed on it (wins are tax free)
9. and then there’s the whisky (barrels and bottles)……..my IFA would never recommend this!
10. I watch lots of YouTube - “Pete Matthews - meaningful money“ has great videos and would be my recommendation