Minimum Contributions to APP(2)
Following my original question and the stonewall response from IR and my insurers, I have conducted further research in order to discover the factors that permit the calculation of Minimum contributions since 5 April 2002. The missing information concerns the Upper and Lower Earnings Thresholds that are used to calculate the NI rebates in each of the three bands and the subsequent tax relief that applies to the employee proportion of the NI.
The LELs are decided by the Sec of State based on earnings growth from figures provided by the Office of Statistics. They are published in Statutory Instruments (SI 2003-324 and SI 2004-263) for the years I was asking about. The values for 2002/2003 are published in an IR document CA16. Curiously these are not apparent on the IR website and it took me a while to trace them on the UKP website through reference to the relevant Act that delegated power to the Sec of State.
As described in IR documents relating to software development, the Upper Earnings Threshold is calculated by:
UET = (3*LET)-(2*QEF)
The Qualified Earnings Factor (QEF) was nowhere to be found until I found a document that again showed software developers how to calculate the values for end of year forms and discovered that it appears to be the same value as the Lower Earnings Limit!
So now:
UET = (3*LET)-(2*LEL) where QEF = LEL
This enabled me to calculate the NI payments for the three bands in question, however, the rebate percentages are age related and vary year on year and are based on tables of values in CA16 and CA17. The values are vital because they give the means of calculating the rebate and the tax relief due (22/78ths) on the employees proportion which is always 1.6% no matter what the employees percentage is.
The good news is that my pension fund is owed about £7,500 by the state. Oh by the way, did I neglect to mention that they haven't been paying it, because I OVERPAID my NICs by a few quid? Since it is capped anyway, they could safely have paid the rebates and tax relief and because they have the right to recover overpayments on their own account from APPs.
It would seem that contracting out of SERPS and S2P which seemed to be a good idea at the time, may not be as beneficial as it was first presented and especially if the payments are made late, their value is depreciated.
Finding out what you need to know in order to calculate what you may be owed is unnecessarily obfuscated and should be made readily accessible. Although the calculation itself is relatively simple, I am becoming more and more like 'Arthur Dent' in HGTTG!
What are my rights in this? (Depreciation not HGTTG)
P.S. Incidentally before IR35, I operated through a partnership and was not entitled to receive Class 1 rebates. At least this means that I benefit from a marginally higher (if investment performance permits) or at least the same additional pension as S2P and my spouse benefits if I am deceased before drawing it. Are my assumptions correct or should I have stayed self-employed and done different work such as intergalactic plumbing?
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Ingleside