Can you work on yachts and still get a UK state pension?
By Peter Brooke - Topics: France, pension transfer, Pensions, Retirement, UK Pensions, Yachting
This article is published on: 30th June 2016
Even if you are (or have been) a UK tax resident and religiously file your Seafarers tax return every year (which you probably should), does it mean you benefit from such things as the UK State Pension? Unfortunately not…. in order to qualify for any UK state pension (currently approximately £155per week from around age 67,) you need to pay National Insurance contributions (NIC). You need at least 10 qualifying years to receive any of the ‘new state pension’ (for those born after 1951).
In order to be eligible to pay NIC and therefore build up some allowance for UK state pension you must have a NI Number.
There are 4 main classes of NIC
- Class 1 – paid by UK based employees earning more than £155 a week and under State Pension age
- Class 1A or 1B – paid by employers
- Class 2 paid by self-employed people
- Class 3 – voluntary contributions
- Class 4 – paid by self-employed with profits over £8,060p.a.
For yacht crew, who very rarely have any social security contributions in any country, due to the flag state not collecting them from employing companies or due to not having social security systems as we know them, it is highly likely that you will have gaps in your NI record. If you do have a gap it is possible to pay ‘voluntary’ contributions to top up your NI record and receive more pension income later.
We believe that crew should be paying the Mariners Class 2 NICs which are considerably cheaper than Class 3 and have the additional benefit of ‘contribution based employment and support allowance’ when they return to the UK, which is not available if you pay class 3 NICs.
Currently it costs £2.80 a week for Class 2 (£145.60p.a.) or £14.10 a week for Class 3 (£733.20p.a.); either way, the cost is very low to secure an income for life later.
To put this into perspective… if you were to theoretically only pay Class 3 for 35 years you would invest a total of £25 662; you then receive £155per week from, say, 67 which is £8060p.a. which equates to a yield on investment of 31% per year – a no brainer, assuming of course the UK government can continue to pay! *also it is unlikely you can only pay Class 3 for all 35 years, but the point is clear!
However, the form to apply for a review of the NI gap and to register to pay voluntary NICs is complicated and quite detailed which can put some people off from even applying to see if they are eligible to pay it. This is also another great reason to keep a seaman’s discharge book up to date at all times, right from the start of your career.
I would like to thank Clare Viner from Marine Accounts, who are experts in yacht crew taxation, for her assistance in researching this article.
There is also a wealth of information on the UK government website and a Mariners NI Questionnaire which can be filled out for a review of the situation
This article is for information only and should not be considered as advice.