New State Pension Rules Could Affect British Expats

by Ray Clancy on January 27, 2015

British expats who want to be eligible for a UK state pension need to be aware of new rules that could affect them from April of next year.

Anyone retiring after 06 April 2016 will be affected by the rules which mean they must pay National Insurance for more years to get a full state pension. Rather than 30 years of contributions they will need to pay 35 years under the new regime.

This means that anyone who has missed out on paying NI due to being abroad may wish to consider paying top up contributions, according to financial experts.


New pension arrangements for British expats come into effect April 6, 2015

The idea of the new pension arrangements is to offer a flat rate pension, expected to be worth around £155 a week, and do away with the other elements that currently make up the state pension, such as the additional state pension and savings credit. The current full state pension provides £113.10 a week.

Fewer qualifying years of National Insurance contributions reduce the weekly amount accordingly. To qualify for any amount of the new pension in future, people will need to have at least 10 years of qualifying National Insurance (NI) contributions. The current rules require just one year’s payment to be eligible for some state pension payments.

Experts have recommended that expats and former expats seek advice on whether they should make voluntary contributions to plug any gaps in their NI contributions. The decision will depend on personal circumstances and it may be more prudent to put the money into a separate investment.

‘Financial advice considerations need to be taken into account as it largely depends on life expectancy and future intentions on where you are going to live. It may be worth checking whether or not you are entitled to a full state pension, and you can check by asking the National Insurance office. Then you can make a decision on whether you want to plug the gap,’ said Dawn Register, a partner at BDO Tax Dispute Resolution.

Expats who have moved overseas permanently are not able to get a refund on their NI contributions, even if they have no plans to retire in the UK in the future. But according to Adam Cole, specialist in advice policy at independent financial adviser Towry, as the NI system is ‘pay as you go’, if you have paid in to qualify for the state pension, then you are entitled to some amount of state pension.

‘Certainly within the European Union, if you have paid in to the UK scheme and met the minimum thresholds you would be able to claim the state pension,’ he said.

If you are working abroad, you may still be eligible to pay NI contributions in the UK depending on where you are working, who for, and for how long, according to Patrick Connolly, certified financial planner at Chase de Vere.

‘If your UK employer sends you abroad to work, for up to two years, you might simply need to carry on paying UK National Insurance as usual. If you leave the UK you may need to decide whether you wish to pay voluntary National Insurance contributions while you are away,’ he explained.

‘This is likely to depend on whether you plan to claim the UK state pension in the future, whether you’re likely to be returning to the UK and on the state pension entitlements you’ve already built up. Either way, you should make sure that you understand the rules which govern your entitlement to the UK state pension,’ he added.

More information in the UK state pension and making voluntary top up contributions can be found on the HMRC website.

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