Company Directors & NI Contributions

[smartie]

It's very common these days for Co. owners/directors to pay themselves a minimal salary (£500pcm) and then the rest of their earnings by way of dividends. Obviously this means they are paying no NIC and I was just wondering if there are any possible issues re future state pension/benefits/SSP etc?

[JustinP1]

It would make sense then to ensure that that pay at least a pound or so over the threshold to make sure the year is accounted for in contributions...

[RizzoTheRat]

My accountant has advised me to pay a large enough salary to make sure I am above the primary threashold (£110 per week) and therefore an paying NI.

[HRG.]

£435.00 PCM is the magic number. Above the NI threshold but below the tax threshold.

[Four Cofffee]

I get a letter every year saying I have no NI and offering to let me buy the year at about £300. I assume this is about the requirement to have 30 years of contributions to get a full state pension. There is nothing precise in that letter which tells you the implications if you don't stump up, and we did have a debate some time ago whether on PH, given that a full pension is now achieved at 30 years, whether paying in more than 30 years brought any advantages at all. I have about 28 in the pot so £600 would buy me the last 2 years. IF it is a straight pro-rata my state pension will be reduced by 7% ( £5.60 a week) so I would have to live for about 2 years to get my £600 back in pensions not a bad deal. My concern was whether by the time I retire the state pension will only go to those who have made no other provision.

[groomi]

Four Cofffee said:

My concern was whether by the time I retire the state pension will only go to those who have made no other provision.

I've got another 35 years to go and I am 100% certain that your concern will be correct...