Many UK expats neglect their UK state pension when they move overseas. This is a huge mistake and could cost you thousands in the future when you will potentially need it most. You may be unaware, but even if you move overseas, you are still eligible for the UK state pension.
WORDS Mathew Renier
Currently, the full UK state pension is £185.15 per week, or £9627.80 a year, double that and for a married couple it’s £19,255.60 a year and this is going up with inflation every year. To put this in perspective, to get an income of just short of £20k, increasing every year with inflation guaranteed every year from retirement age, you are going to need around £500k from a private pension, probably a lot more.
How can I get this?
Well, put simply, you need to pay your National Insurance. You’ll usually need at least ten qualifying years on your National Insurance record to get any State Pension. You’ll need 35 qualifying years to get the full new State Pension. You’ll get a proportion of the new State Pension if you have between 10 and 35 qualifying years. You can check how many years of contributions you have made already by going to www.gov.uk/check-state-pension.
Do I qualify, and can I make contributions whilst I am abroad?
More than likely, you will qualify. To be eligible, you need to have paid National Insurance for at least three years. If you haven’t, then you must have lived and worked in the UK immediately before leaving and have lived in the UK for three years in a row. If you meet the above criteria, you are eligible for class 2 contributions.
Is it worth making up years?
If you qualify for class 2 contributions as per above, then more than likely YES, make the payments. Class 2 contributions as of 2022/23 are £3.15 per week or £163.80 a year. So another crude calculation of £163.80 x 35 years is £5,733. This means it’s going to cost around £6k in total for a pension of almost £10k a year every year (17 years of pension payments from 67 to 84 is £170k). Both the £6k and £10k will go up with inflation, so it’s not exact, but it should illustrate the point that it’s a very good deal. Your 67-year-old self will be thanking your 40-year-old self for ensuring a clever investment for your future.
How do I make up the payments?
Ok, now this you need to sort quickly. If you were born after 5 April 1951 for men and 5 April 1953 for woman you can make up to 16 years worth of back payments if you do it by 6 April 2023. If you do it after 6 April 2023, you can make up to six years back payments, which may be enough.
To do this, you need to go read the leaflet NI38 about Social Security abroad and check you qualify and then fill out the form at the bottom to apply and pay.
So another calculation, 16 years at £163.80 is £2620.80.
£9627.80 / 35 = £275.08 x 16 = £4401.28.
So the above shows you that if you made a contribution of £2620.80 to your pension, then you would get £4401.28 per year from the state pension at retirement. If that was paid over 17 years, without inflation, that would be £74821.76 in pension payments.
All of the above are some general points about the state pension, there are more details such as class 1, 2, 3 NI contributions and everybody has different circumstances. I hope this information helps you make your own decision about what you want to do. I can’t be held responsible for you taking this information out of context.
We are financial advisors and can help you navigate the above if you would like us to, so please contact us if that is of interest.
Matthew Renier is a retirement Specialist AwPETR DipFA. He is now based in the Algarve.
matthew@arthurbrowns.co.uk
www.arthurbrowns.co.uk
+351 910 262 378
