Voluntary Class 2 NI buying Contribution based ESA

Just 1 Year To State Pension-Poorly Client-Full NIC Record to 5.4.2018-Pay Class 2 Voluntary 18/19?

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Self employed client has just over one year until he draws state pension. He packed in the s/e 31.3.19 due to illness, with very low profits in 2018/19.

He has savings of £75,000 cash.

He has 47 years full national insurance contributions with no gaps up to 5.4.18, and so does not need to pay Class 2 NIC 2018/19 to buy any more state pension.

However, the list of Class 2 benefits includes Contribution-Based ESA and Bereavement Support Payment. I know very little about these payments, but am particularly intrigued about the ESA.

Should he pay the voluntary Class 2 NIC for 2018/19 and try to claim the ESA, or will he have paid enough NIC already to pay for the ESA.

He has no other income apart from bank interest to tide him over for a year.

 

 

 

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By paul.benny
10th Jan 2020 07:54

ESA has two levels
- sick but going get better - £73.10/week
- never going to recover - £103.15/week
Contribution-based ESA is payable for up to a year, means-tested. After a year, or without the right contribution record, claimants move to the means-tested variant. Recipients of the lower rate ESA are expected to participate in activity to help them get a job once they're well. It doesn't matter that they're approaching pension age.

Note that contribution-based ESA doesn't unlock other benefits such as housing benefit.
It's crucial to understand that the DWP's definition of sickness (and hence eligibility for ESA) isn't quite the same as the rest of us. The test for ESA is capability for work. So an HGV driver may fail their medical but being unfit to drive doesn't stop them stacking supermarket shelves. Ergo not unfit for work and no ESA.

Importantly, the test is 'could this person work', not, 'would anyone hire them'.

The ESA assessment process is fairly hostile to claimants and seems to be designed on the assumption that claimants not entirely honest. So your client will have to complete ESA50 (Capability for work) form and attend an assessment. Many of these are flawed and the success rate on appeal is high. Award of ESA depends on the points scored from the ESA50 and verification via the assessment.

so...

Voluntary NI contributions are £725(?) and have to be paid before knowing whether ESA world be awarded.

A year's ESA is £3,500 - but that's not certain and it may well involve a struggle. Does your client have the stomach for that?

How ill (ie unfit for any work) is your client? I'd recommend your client visiting Citizens Advice and getting view on their chances of a successful ESA claim. They can help complete the ESA50 and estimate the points that your client's illness score.

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Replying to paul.benny:
By penelope pitstop
10th Jan 2020 13:02

Thank you for that most excellent response.

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By Not Anonymous
10th Jan 2020 08:59

Under the transitional rules 47 years doesn't guarantee the full new State Pension. Have you/he checked his forecast on gov.uk to see that he is going to get the full £168.60?

If self employed for a long time he probably is but 47 years in itself is no guarantee.

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Replying to Not Anonymous:
By penelope pitstop
10th Jan 2020 13:03

Thank you for that valuable information.

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By David Heaton
16th Jan 2020 16:52

Contribution-based ESA is NOT means-tested - that's only for income-related ESA.

Your client does NOT need to pay anything more to get it (and paying £775 in Class 3 would be pointless - 1. Class 3 doesn't count for ESA, which relies on Class 1 or Class 2; 2. He has 47 years on the clock, so he's not entitled to pay them anyway).

The NIC qualification for ESA(C) has two conditions. Having 47 years on the clock ticks one box. The other looks for Class 1 and/or Class 2 paid in one of the two tax years preceding the benefit year. The benefit year starts on or shortly after 1 January, not the tax year. So, for a claim made now, he would need to have paid enough Class 2 for either 2018-19 or 2017-18. He presumably paid Class 2 for 2017-18, and if he didn't he can still do so. So he fulfils the contribution conditions during calendar year 2020 without paying anything extra.

Any contributions paid for the tax year in which he reaches state pension age don't count anyway - the clock stops accumulating at 5 April before the SPA date. This goes back to the days when the DHSS needed months to collect and process cards full of stamps before they could pay the correct amount of state pension, but computers and RTI have not changed the basis. If he works, he has to pay NICs, but they don't count for anything.

As to the circumstantial qualifying conditions, that's a different matter: see https://www.gov.uk/employment-support-allowance.

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Replying to David Heaton:
By penelope pitstop
16th Jan 2020 17:23

Brilliant answer. Extremely helpful.
Thanks.

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