Many UK expatriates are unaware that they remain eligible for a full UK state pension, even after they move overseas. But for some of you time is running out to backpay certain gaps in your National Insurance contributions. You may need to take action now to lock in your eligibility. Trevor Keidan explains.
The UK state pension is currently £185.15 a week which equates to £9,628.50 per year. While it isn’t going to afford you a life of luxury in retirement, it is still a benefit worth securing as part of a wider retirement plan, if you are eligible.
All UK expats should check their National Insurance record and assess whether it is worth plugging any gaps, but this is particularly important for men born after 5th April 1951 and women born after 5th April 1953.
Individuals in this demographic are currently able to make payments dating back to 6th April 2006, subject to eligibility. But you’ll need to get your skates on. This incredible opportunity to backpay up to 16 years only applies until 5th April 2023. After that, you will be limited to six years of back payments.
Regardless of whether this applies to you or not, if you are a UK expat who has made National Insurance contributions at some point you will find useful information on securing a full UK state pension in this article.
How expats can secure a full UK state pension
British citizens who have worked and made National Insurance contributions in the UK are eligible for some form of state pension as long as they have at least 10 qualifying years. This will be a pro-rata payment for anyone who has contributed for between 10 and 35 years. Once you have 35 qualifying years you will receive the full amount upon reaching state pension age.
This age is rising. Older individuals may receive their pension at 66 but for most Brits it will be at 67 or 68 (for those born after 1978). You’ll find a detailed timetable here which lists birthdates and pension ages.
What many expatriates don’t know is that you can continue to pay voluntary contributions when you move abroad in order to attain your 35 qualifying years. In addition, it is possible to back pay a certain number of years.
That means that, even if you were unaware of voluntary contributions and have been living abroad for some time, you could still be able to secure the full UK state pension by catching up on years you have missed. But time is running out for certain individuals.
How to check your UK National Insurance record
If you are unsure how many years of NI contributions you have, it’s very easy to check. You’ll need to register for Government Gateway in order to prove your identity (if you haven’t already) and then you can access your NI record and state pension forecast online at this link. You’ll find a detailed yearly breakdown showing exactly how many qualifying years you have accumulated and the years where there are payment gaps.
Making UK National Insurance contributions when you live overseas
To top up your UK state pension you can carry on paying voluntary class 2 or class 3 contributions while you live overseas. Class 2 contributions are just £3.15 per week (2022-23 tax year) while class 3 contributions are £15.85 per week. Certain criteria apply – I’ve summarised the basics below but you’ll find full information in the government guidelines here.
To be eligible for class 2 contributions, expats living and working overseas need to have paid national insurance for at least three years. If this is not the case, they must have lived and worked in the UK immediately before leaving and have lived in the UK for three years in a row. In most cases, if you are eligible for class 2 contributions, topping up is a worthwhile investment.
Expats not working overseas, including those who have retired and wish to improve their state pension payout, will be eligible to pay Class 3 contributions. You will need to weigh up the pros and cons of paying over £800 per year to secure the UK state pension. It may be better to invest elsewhere. If you are unsure, a financial adviser can help.
Back paying UK National Insurance contributions
In most cases, if you want to pay voluntary contributions you must do so within six years of the year in question. The deadline each year is 5th April, so you currently have until 5th April 2023 to make up any gap for the tax year 2016-17.
However, there are also exceptions to this .
Specifically, men born after 5th April 1951 and women born after 5th April 1953 can make up gaps that date back to 6th April 2006, subject to eligibility. But take note, this only applies until 5th April 2023.
If you fall into that group and have an incomplete National Insurance record you should definitely act quickly to secure a full UK state pension. Once you’ve checked your record and assessed that it is in your interest to plug payment gaps you should:
- Read leaflet NI38 regarding social security abroad
- Fill in the form at the end of the leaflet – CF83 – and send it to HMRC at the address on the form
- They will confirm your eligibility and send information on how to top up the years you have missed and set up payments going forward
I would urge all UK expats who have paid National Insurance contributions in the past to check out your status and assess whether it makes financial sense to back pay missed years to complete the 35 qualifying years required to receive a full UK state pension.
Look at it this way, at current rates, you’ll be paying around £170 per annum to secure nearly £10,000 a year in retirement. For most people, that’s a no-brainer.
A UK state pension will not be enough
While it’s a great idea to continue paying your NI contributions to secure your UK state pension, it is NOT a good idea to rely solely on that pension to fund your retirement.
Expats working in Asia should also be saving and investing towards retirement with tax-efficient products tailored to your needs.
Here at Infinity, we offer pension planning services across the Asia region and can help you find retirement solutions to suit your unique situation.
Contact us for a full pension analysis with one of our experienced financial advisers and find out what you need to do to guarantee financial security in retirement.
I can honestly say that my main driving force at Infinity is a fundamental belief that good financial planning makes people’s lives better. People working abroad really do have an enviable opportunity to make a huge success of their lives, and making good financial decisions is essential…as well as working damn hard!