Can someone explain to me national insurance?

I just got a national insurance number and a british bank account, so presumably I would be paying into this for a state pension in the UK, correct?

It's also my understanding that, though there probably won't be anything left, I would still get social security benefits (in theory).

My question about paying into the UK state pension: what if you don't plan on retiring in the UK? Do you lose out if you work in the UK for 10 years and then just decide to split and go back to the U.S.? I'm just trying to figure out if I'm paying into this vague bottomless hole that I can't reap anything back from unless I stay and work in the U.K. for the rest of my life. Of course I also understand that national insurance pays into the NHS so it's not like I'm paying for nothing.

Is the U.K. pension plan just as bad as social security -- i.e. what will be left to collect from a couple of decades from now? It's my understanding that there is some kind of bilateral agreement regarding "credits" earned on state pension between the U.S. and the U.K...I'm sure none of it matters and you just have to hope for your private pension earnings anyway. Just wondering what I hope (if any) to benefit from what it is I'm apparently going to be paying into.

 

Thanks if you know anything and can offer any insight or understanding.

I just got a national insurance number and a british bank account, so presumably I would be paying into this for a state pension in the UK, correct?

National Insurance isn't just ring-fenced for pensions and the NHS but the level of state pension is based on your contribution record.

It's also my understanding that, though there probably won't be anything left, I would still get social security benefits (in theory).

Should do, though they are gradually raising the state pension age.

My question about paying into the UK state pension: what if you don't plan on retiring in the UK? Do you lose out if you work in the UK for 10 years and then just decide to split and go back to the U.S.? I'm just trying to figure out if I'm paying into this vague bottomless hole that I can't reap anything back from unless I stay and work in the U.K. for the rest of my life. Of course I also understand that national insurance pays into the NHS so it's not like I'm paying for nothing.

Well it's taxation so there's no real choice in paying National Insurance contributions unless you plan on not working, some Benefits such as Unemployment Benefit have a NI contributions based part, if you've paid enough NI contributions you're eligible for these (notwithstanding restrictions on rescourse to public funds)

Is the U.K. pension plan just as bad as social security -- i.e. what will be left to collect from a couple of decades from now? It's my understanding that there is some kind of bilateral agreement regarding "credits" earned on state pension between the U.S. and the U.K...I'm sure none of it matters and you just have to hope for your private pension earnings anyway. Just wondering what I hope (if any) to benefit from what it is I'm apparently going to be paying into.

The british state pension isn't huge no, no idea what you'll get out tbh.

David.

Theres supposed to be some sort of UK/US agreement with the Social security/National insurance at retirement age., It's supposed to count in each other countries, I haven't really read up on it, and it was talked about by some UK expats in the US. You'll have to do some digging to find out more.

Is the U.K. pension plan just as bad as social security -- i.e. what will be left to collect from a couple of decades from now? It's my understanding that there is some kind of bilateral agreement regarding "credits" earned on state pension between the U.S. and the U.K...I'm sure none of it matters and you just have to hope for your private pension earnings anyway. Just wondering what I hope (if any) to benefit from what it is I'm apparently going to be paying into.

I think you are being unnecessarily pessimistic about both US Social Security and British Old Age Pension.  Both are well-funded and reliable.  You WILL get your Social Security, and your Old Age Pension, if you pay for enough years.   I'm vested in both systems and looking forward to collecting in due course... whether I'm living in the USA or UK, doesn't matter.

Obviously, 401Ks, private savings & investments are more problematic and unreliable.  Investments can lose value, companies can go bust or abscond with your funds.  This is unlikely to happen with either the British or the United States Government..

The reciprocity you mention comes into play, I believe, when you don't have enough credit in either system to be vested .. in those circumstances, you can transfer your credits from one system to the other in order to qualify.  You don't have to do this, you can collect on both.  

One thing to be wary of is that when eligible for the state pension you will not get the automatic annual increases if you are living in certain countries, the amount you are paid instead being frozen at the level being paid when you leave the U.K.

I'm not sure if the situation might have changed now, but as of a few years ago, the U.S. was definitely in that category. 

One thing to be wary of is that when eligible for the state pension you will not get the automatic annual increases if you are living in certain countries, the amount you are paid instead being frozen at the level being paid when you leave the U.K.

I'm not sure if the situation might have changed now, but as of a few years ago, the U.S. was definitely in that category. 

No - if you are resident in the United States, you get the full UK pension that you would be eligible for if you lived in the UK.  Here's a recent BBC article about frozen pensions. http://news.bbc.co.uk/2/hi/business/8232612.stm

And a quote from the article -
"Annual upratings of the UK state pension are paid to recipients living in the European Economic Area and Switzerland, as well as countries where there are reciprocal social security agreements such as the US, Jersey, Guernsey and Turkey.
Countries where pension payments to expats are frozen include Australia, Canada, South Africa and Hong Kong. "

Ah, looks like they changed that for the U.S. then.   It's still grossly unfair that pensions are frozen just because somebody chooses to go and live in one country rather than another though.

As I understand it, though, you can "top up" your contributions to qualify for your pension. But if you've not paid in a lot, your top up fee could end up being quite a lot.

Hi there,

National Insurance contributions from your salary go into the government coffers. From there, all the various public spending the government does uses the money you, and I and millions of others have put there. Partly, this will include your State Pension yes, and of course the already mentioned NHS. The Police, fire Service, teachers, ministerial salaries (and expenses - sorry !) government ministry's etc etc are all funded from here as well.

If you decide to up sticks and move elsewhere, and say you've contributed 10 years worth into it, you should be entitled to that money back in the form of a pension after what would have been your retirement age had you stayed. Once it's been paid in, it's not accessible prior to that date.

I'd suggest that you speak with a Financial advisor to at least find out a little more and of course then speak to a suitably qualfied tax advisor who has knowledge of the UK tax system (including pension knowledge) and the country you do eventually retire in (in this case sounds like it might be back inthe USA) so you can ascertain any tax implications and currency implications etc etc.

Someone has already pointed out, the UK pension amount isn't very much at all, add in to the fact theres a real mess concerning pensions from a government level, I'd suggest keeping your option of a UK pension in collaboration with other savings and investments you make for your retitrement - i.e , have some more rather than just a UK pension.

Cheers, DtM! West London & Slough UK!