Taxback's National Insurance FAQ's

What are NIC's?
National Insurance Contributions (NICs) are a compulsory government levy on earnings. NICs are usually paid with your PAYE tax on each payslip. NICs are paid at the following rates: 11% by employees, 12.8% by employers 8% by the self-employed

The monies raised by NICs are used to fund various state benefits, in particular the State Second Pension (S2P).

This is fine for Brits, who may one day actually receive a state pension. For most expats, the NICs paid during their time in the UK will never be seen again!

What many people don't realise is that they can 'opt-out' of the State Second Pension (S2P) and 'contract-out' that portion of your NICs relating to it into a private fund.

What is 'contracting-out' ?
By 'contracting out' you are leaving the state pension scheme. If you work in the UK for less than 11 years you will not be entitled to a state pension anyway , so this is no great loss!

Instead, you are asking the state to re-direct the NIC's earmarked for your state pension (the S2P portion of NICs) into a private pension fund.

How do I contract out of the state pension?
You just need to sign a declaration. If you would like more information about contracting out or pensions in general we recommend that you speak to an Independent Financial Advisor (IFA) - Taxback would be happy to introduce you to a regulated IFA. Alternatively, you can simply download the forms and send them back to Taxback, 167 Earls Court Road, London SW5 9RF.

Can I backdate my claim for previous years?
You can only backdate to the beginning of the present tax year (6 th April).

What if I do not have a National Insurance number?
Unfortunately rebates will only be given to taxpayers with a permanent NI number.

How much of a refund am I entitled to?
This depends on your age and your earnings. For example: if you are 25 and earned £18,000 your refund would be £900.

What happens after I have contracted out?
You will continue to pay National Insurance as usual, but the government will pay an annual rebate of your S2P into your private pension fund. You will not pay any more NIC's than usual and will not be asked to make any additional contributions.

What happens when I go home?
A UK pension can usually be transferred to a similar type of pension policy in your country of residence.

For Kiwis, this may mean you can access 40% off the pension funds immediately in a cash lump sum on your return to NZ, rather than have to wait until retirement!

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