Scot Drummond from Taxback answers your most frequently asked questions about National insurance rebates:
Foreigners and moving away from the UK
Why is this good for foreigners?
If you are not planning on being in the UK on your retirement, the government will impose a freeze on any increases in your retirement pension. By receiving your rebate now you will not be subject to this freeze and can set up your retirement benefits how you wish.
Can I transfer my fund back home?
Transferring pension benefits into a pension fund back home is allowable if the accepting pension is approved by the UK regulator (many countries are approved including Australia, NZ, USA, EU countries and South Africa.) AXA will not charge you for this however your home country's pension scheme may charge you for the transfer. Even if a transfer is not advisable you will always be able to have the pension (when it becomes payable) paid into a bank account back home.
What if I've worked in the UK during the current tax year, but have since left the country?
Unfortunately you have to be living in the UK at the time of your claim. Policy documents can only be mailed to a UK mainland address.
Timing Questions
How many years can I claim for?
Your claim covers the current tax year (which runs until April 5th) and all years going forward. The Department of Works and Pensions (DWP) does not allow anyone to backdate claims before the current tax year. However, you don't need to re-apply each year.
Do I have to reapply every year?
Once you have applied for a National Insurance Rebate you do not need to reapply again - your NI Rebate will be automatically credited to your stakeholder pension plan annually.
When does the NI Refund get paid to my stakeholder pension plan?
HM Revenue and Customs (HMRC) only pays out National Insurance Refunds once a year. Usually the NI rebate payment is made in October after the preceding tax year. i.e. October 2009 for the period 6 April 2008 to 5 April 2009.
About the investment
Why can I only redirect my NI Rebate into a pension plan and not take the cash?
The National Insurance Rebate is referred to as "protected rights" and must be used for your retirement. A stakeholder stakeholder pension plan is an approved vehicle through which your rebate can be invested on your behalf until retirement.
When can I access my NI Refund?
Your National Insurance Refund will be invested until age 55 at which stage you can use the lump sum to purchase a retirement annuity.
How is my National Insurance Refund invested?
Your National Insurance Rebate will be invested in the default AXA Managed Fund. You can change this at any time with AXA and select from any of their funds. The Lifestyle investment programme gradually moves money away from equity based investments towards the annuity protector fund and cash as the member gets older and closer to their selected retirement date. It invests your account in funds that will keep pace with the cost of buying your retirement benefits.
Who is my National Insurance Refund invested with?
Your National Insurance Rebate will be invested by AXA. The AXA Group is one of the leading financial services groups in the world. You can choose which funds to invest in or leave it to them in their Managed Fund.
How do I get online access to view my NI Rebate investment?
Once your personal stakeholder pension plan has been activated you can register for an individual User ID and PIN to view your investment online by registering on the AXA website. Details will be provided with your membership pack. You will also be able to update any personal details, such as change of address, online.
Rules and Regulations
What if I do not have a permanent NI number?
Due to a change in regulation, HM Revenue and Customs and AXA DO require a permanent NI number to process any NI Rebate application. To obtain a permanent NI number contact the Department for Work and Pensions (DWP). Find out the contact details for the area in which you live or work via the DWP website: www.jobcentreplus.gov.uk
This will return a list of telephone numbers and contact details of Jobcentres in your area, find the one nearest to your home or office. After booking and attending an appointment, you will be sent a National Insurance numbercard, containing your permanent National Insurance number.
Can I change my mind?
Contracting out of the state scheme is a year by year decision and if you opt out in one year you are not committed to do the same in later years.
What charges apply?
Stakeholder pensions must meet the standards laid down by the government. There will be no charge to the individual to set the pension up. There will also not be a charge on the refund. There is an ongoing investment fund charge of 1%, which is within the stakeholder rules (AXA will pay a commission to "Ni Rebate Online" from this 1% charge).
What happens to my investment if I die?
If you die before you retire AXA will use the pension fund you have built up to buy a pension for your husband or wife if, when you die, they are 45 or over or are receiving child benefit. Otherwise AXA will pay a cash sum and your plan will end
What if my employer offers a pension scheme?
Some employers' occupational pension schemes contract-out all scheme members automatically. Other employers' occupational schemes are 'contracted-in' and the scheme pensions are paid on top of any second state pension. You should check with the administrator of your pension scheme before making any decisions.
Where can I get more information on my state pension?
For more information on your state pension visit the Department for Work and Pensions website on www.dwp.gov.uk
Is this a scam or a tax scheme?
No. This isn't a tax scheme at all. Every person is entitled to contract out and receive an NI Refund. It is a personal choice that the department of work and pensions allows you to make. See the link to the following FSA document. http://www.moneymadeclear.fsa.gov.uk/pdfs/contracting_out.pdf
Why do I need to post my application form as well as submitting the online application?
The online application allows AXA to open your stakeholder pension plan, but a hardcopy signature is legally required to process your National Insurance Rebate claim
I applied for an NI refund in previous tax years, do I need to do anything?
No action is required - you have already opted out. If you need to contact your provider about a change of address, check the confirmation documentation that you were sent to find the name and contact details of your pension provider.
Who are "NI Rebate Online"?
NI Rebate Online is a trading name for Sable Private Wealth Management who are authorised and regulated by the Financial Services Authority (FSA) and offer the facility for individuals to contract out of the Second State Pension (S2P) on a no advice given basis. Should you require advice you should speak to your independent financial adviser. If you have further questions please email us on info@nirebateonline.com or call us on 0870 458 2239. If you do not have an adviser, you can find one from IFAP at www.unbiased.co.uk.