Voluntary Contributions and Self-Employment
The Important Facts and Information You Need to Know
13:19 30 March 2013
If you are self-employed and you can choose to pay Voluntary Class 2 payments then you should choose this option instead of paying for the Voluntary Class 3 payments. It normally costs less to pay Class 2 versus Class 3 payments. There are other reasons besides cost to choose the Class 2 payment option.
- One of these reasons is that you will get more state benefits than if you have volunteered to pay the Class 3 payments. The benefits for weekly rates are only £2.65 for the Class 2 versus £13.25 a week for the Class 3 payments.
- The Class 2 payments do not include state pension, statutory sick pay, or job seekers allowance.
- If you feel you need any of these additional benefits you should look elsewhere to meet these needs.
Individual retirement accounts, the stock market, and bonds for the retirement portion can help with your investments. To make sure you are set in case of the loss of work or becoming sick, you should make sure you put enough money aside and/or look into companies which offer supplemental insurance in addition to the standard national health insurance.
The types of benefits you will get since you are self-employed will consist of bereavement pay, widowed parents allowance, incapacity benefit, maternity allowance, and the basic state pension. You will not be allowed to collect the secondary state pension with the Class 2 payments.
There is no difference between the Class 2 and the Class 3 when it comes to collecting the secondary state pension. Neither one of the plans can collect pension funds. You would have to be an employee or at least a part time employee, and a part time self-employed individual to collect this benefit.
In conclusion you should probably continue to pay your Class 2 level payments instead of stopping them or starting to pay Class 3 payments. Class 2 is cheaper and you maintain most of your state benefits versus Class 3 with feweravailable benefits.