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What happens to my NI Contributions after 30 years of payments

by BobbyW 09 October 2012 |

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If it only takes 30 years for my NI Contirbutions to provide my state pension where are the other 25 odd years worth that I pay going to?

Is this auto-enrolment just another way to get the government out of having to pay the means tested pension credits etc..... Ohhh I see you have saved £32.14 in your pension sorry you are excluded from any other income over and above your state pension (which by the the way you paid up 25 years ago)

Ps Im sure the over payments go toward the massive pension pots of the government workers in the first place........

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174

JoeEasedale posted
How about paying for your NHS costs?
Posted on 09 October 2012 | Love 0 loves Report
10

BobbyW posted
my full NI for the 30 years isnt just to cover my state pension Joe, I appreciate some of that goes towards the NHS too, as I appreciate I would need to pay a small percentage amount AFTER the 30 years... Not the full 12% (ish)

So dont buy the NHS answer Joe sorry.
Posted on 09 October 2012 | Love 0 loves Report
878

MikeGG1 posted
At least you can now get it after 30 years. We had to pay for 44 years to get a full pension. I reckon it was yet another of Labour's generosity with money they didn't have and were never likely to have.

The other 22 has been taken into account in the funding of your pension and also for those who don't do much more than 30.

The auto enrolement is a replacement of the second tier pension with a funded arrangement which is what was originally intended by the Conservatives for 1975 (Keith Joseph plan). Unfortunately, Labour scrapped those plans when they got in and took another 3 years before their own plan (Barbara Castle) was ready and that was unfunded, leading to most of the reason for State Pension Date being deferred.

Opting out should never have been allowed but that was based on past history. Why should those who are funding their own pensions have to contribute to benefits for those who spend their money instead?

Mike
Posted on 09 October 2012 | Love 0 loves Report
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BobbyW posted
I think the time factor comes into play, in all honesyt trying to auto-enrol someone contributing 3% income into a pension at age 52 is about as much use as an ashtray on a motor bike.

The problem is we never can move away from the model that we are in due to the government using the pot for other reasons, my daughter who was born this year will need to work until her early 70's in order to receive her state pension so I read. Thats assuming she is going to be healthy enough to do so.

In all honesty pensions should be compulsory from the start of employment, with a predetermined % taken so the people who work the longest and contribute the most receive the most, the system is a farce with so many people milking the system for all its worth with benefits left, right and centre for those who make any effort to support themsleves and rely on the state to help them. There is a difference between some one who cant work and someone who wont.

The only way to stop the situation getting worse is to stop it and start again, afresh from those starting to work from now on..... Those currently in employement need to carry on in the same vain but the new blood should have the new system implemented.....
Posted on 09 October 2012 | Love 0 loves Report
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MikeGG1 posted
Your idea wouldn't work because someone would still have to pay the pensions of people who have already retired and those who will be retiring meanwhile.

Your example of someone of 52 who will probably have to work until 70 would have a fund of 144% of salary on retirement without any real investment return because tax relief and employer contributions make that 3% up to 8%.

Mike
Posted on 09 October 2012 | Love 0 loves Report
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BobbyW posted
@ Mike

"The only way to stop the situation getting worse is to stop it and start again, afresh from those starting to work from now on..... Those currently in employement need to carry on in the same vain but the new blood should have the new system implemented....."

That assumes the 3% I was refering to was the employee contribution. where as in realilty it was the total contribution employer and employee which assuming 40% tax relief gives(4.2% total) gives approx 75% annual salary... I refer you to article you cant retire on pension pot of £50,000 which in this situation would assum a salary of £66,666 IN TODAYS MONEY... Even then it appears that with the £50,000 pot you would only be £20 per week better off than having no private pension and claiming pension credits?
Posted on 10 October 2012 | Love 0 loves Report
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MikeGG1 posted
My 8% assumed a basic rate payer and included employer contributions, which would be lost if opting out.

At least 4% comes from the employee, 1% would be his/her basic tax relief on that and 3% would be from the employer. If the employee is on 40% they would be able to reclaim another 1% frrom the taxman at the end of the year so that it would only cost them 3%.

I therefore stand by my pot of 144% of salary, assuming the employee only pays the minimum. If he/she pays more then the tax addition and relief would also rise and so would the 144%.

Mike
Posted on 10 October 2012 | Love 0 loves Report
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BobbyW posted
So the employer will pay 3% (+tax relief 0.6%)?

Client would need to be higer rate tax relief for the £50,000 pot example to work
Posted on 10 October 2012 | Love 0 loves Report
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MikeGG1 posted
No, the employee pays 4%, the provider adds 1% tax relief on the employee contribution (20% of 5%) and the employer pays 3%. The total is 8%, unless either party pays more.

After 18 years that would be 144% of salary. £50k would be achieved with a salary of less than £35K.

The higher rate relief would not be added to the pot but refunded to the employee.

Mike
Posted on 11 October 2012 | Love 0 loves Report

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