While a UK state pension won’t guarantee you a life of luxury when you retire, you shouldn’t look a gift horse in the mouth! It’s not too late to top up your UK National Insurance contributions to secure a UK state pension but you need to act fast. Adon Beddoes explains.
Do you qualify for a UK state pension?
If you have worked a minimum of 10 years in the UK, you qualify for some kind of state pension in the UK. To receive a full UK state pension when you reach retirement age, you need 35 qualifying years of National Insurance contributions.
The current full UK state pension is £185.15 per week. Granted, this is not a fortune, but it is secure pension income that you can rely on, and, let’s face it, every little helps! If you don’t have 35 qualifying years, your pension will be calculated on a pro rata basis.
Many UK expats in Asia falsely believe that they have forfeited their right to a full UK state pension by living and working abroad.
This is not the case. It is possible to continue paying National Insurance contributions when you move abroad in order to secure your 35 qualifying years.
Perhaps you did not realise this and are kicking yourself for not carrying on with your payments?
I have good news for you: it’s not too late!
However, your window of opportunity is closing. Until 5th April 2023 you can fill in National Insurance gaps dating back to 2006-07 by back paying up to 16 years of qualifying years. After that, you will only be able to top up a maximum of six years.
How expats in Asia can secure a full UK state pension
The first thing you should do is to check your UK National Insurance record. Many people are pleasantly surprised at how many years they have accrued with random student jobs!
Verify your UK National Insurance record here to work out whether it is worth you topping up your contributions.
If you are eligible to pay Class 2 voluntary contributions (generally those who work), the cost is extremely affordable. The rates for the 2022-23 tax year are £3.15 per week or around £160 per year.
That’s £160 per year to secure almost £10,000 a year in retirement, which is a big boost to income over a 20-year retirement.
Class 3 contributions (if you don’t work) cost more: £15.83 per week (2022-23), so this is less of a no-brainer depending on your circumstances.
Whether it is worth your while to top up will depend on a number of factors including how long you think you will be working/living outside the UK and the state pension entitlement which you have already built up.
It may work out more prudent to invest elsewhere and I would advise discussing this with your financial adviser.
How do I top up UK National Insurance contributions?
To apply to pay National Insurance contributions while living abroad you should consult HMRC’s NI38 leaflet for guidance and apply using the CF83 form.
Don’t delay as you only have until 5th April 2023 to be able to top up more than six years.
Don’t rely solely on the UK state pension
Of course, if you want financial security and the luxury of choice in retirement, a state pension isn’t going to cut it. It is essential to make your own pension arrangements with a regular savings and investment plan tailored to your retirement goals. If you don’t already have one, I can help you.
Contact me for an initial assessment and together we can come up with a bespoke financial plan to give you the retirement you deserve!
Chartered Financial Planner
It is my fundamental belief that financial planning makes life better. I enjoy helping my clients work towards their financial goals to give them freedom and choice.