National Insurance Contributions - What Yacht Crew Need To Do

(First published 22nd July 2016. Updated 13th March 2019)

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 £155 per week from around aged 67), you need to pay National Insurance contributions (NIC).

On top of which, 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 Nation Insurance Number.

So if you are a seafarer or yacht crew, what do you need to do?

Continue reading to find out more or hit the links below to jump to a relevant chapter that interest you:

National Insurance Class 3 Form

National Insurance Classes

There are 4 main classes of Nation Insurance Contributions (NIC);

Class 1: Paid by UK-based Employees Earning More than £155 per 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 Above £8,060 per annum

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 National Insurance record.

What To Do If You Have a Gap

If you do have a gap it is possible to pay ‘voluntary’ contributions to top up your National Insurance 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 (£145.60 per annum) or £14.10 a week for Class 3 (£733.20 per annum).

Either way, the cost is very low to secure an income for life later.

Piles of Coins Over Time

Image source: https://pixabay.com/photos/investment-finance-time-3247252/

How Much Could I Receive?

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 would then receive £155 per week from the age 67 which is £8,060 per annum which equates to a yield on investment of 31% per year - a no brainer, assuming of course the UK government can continue to pay!

*It's however 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 National Insurance 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.

Credits

I would like to thank Clare Viner from Marine Accounts, 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 National Insurance Questionnaire which can be filled out for a review of the situation.

Peter Brooke is a financial adviser to the yachting community with the Spectrum IFA Group. Spectrum has created Horizons, a unique financial solution just for yacht crew. Peter can be contacted directly via email.

Conclusion

If you want to get your National Insurance contributions back on track, don't leave it too long as you could miss out on the benefits of a state pension in your latter years.

It is advised you speak to a professional financial advisor or accountant who can offer insight and knowledge into the best ways to get your contributions up to date, using the most suitable NI class.

Speak to Us or Comment!

If you're concerned about your state pension and want to get your national insurance contributions in order, our team can review your situation and offer professional advice.

Get in touch with us today or alternatively, let us know what you think in the comments section below.

Click for National Insurance Advice for Seafarers & Yacht Crew

Liked this article? Try reading: National Insurance in the UK and Changes to French Social Security Laws

Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.