Government Deadline Extended for Expats to Secure a Full UK State Pension
The deadline for filling missing national insurance years between 2006 and 2016 has been prolonged by the UK government until the 31st of July, 2023, with the cost remaining fixed at current rates during this period. This decision was made by the government yesterday, seemingly in response to numerous reports of people being unable to reach crucial Government helplines before the previous (and rapidly approaching) deadline of 5 April.
The helplines managed by the Department for Work and Pensions (DWP) and HMRC were inundated, with many people expressing frustration at their inability to get through despite calling repeatedly. However, as part of the top-up process, it is necessary to contact these helplines to obtain information.
The extension announcement means that thousands of individuals who have gaps in their national insurance record between 2006 and 2016, and are currently not on track to receive the full state pension, now have an extended opportunity to acquire the necessary information from Government helplines before making any voluntary national insurance contributions to HMRC. To learn more, download our free UK State Pension Guide.
What happens after the 31st of July?
From 1st August onwards, it will only be possible to fill gaps in the previous six tax years. This is due to the termination of the “transitional arrangements” introduced during the introduction of the new state pension system in 2016. These arrangements were established to provide individuals below the age of 70 with more time to accumulate enough “qualifying” national insurance years to obtain the full new state pension.
Why is filling gaps important?
Qualifying years are accumulated through various means, such as employment or claiming specific benefits. However, many still have a shortfall, prompting them to consider paying to bridge the gap. This can be a highly profitable move, with some individuals spending as little as £800 to obtain a return of £5,500 or more. Some case study examples are offered in our UK State Pension Guide.
What has just changed?
Individuals with gaps in their national insurance records between 2006 and 2016 have until the 31st of July to fill them, compared to the previous deadline of the 5th of April, which coincided with the end of the tax year. The extension results from “transitional arrangements” implemented following the introduction of the new state pension.
However, the process of filling gaps requires contacting The Future Pension Centre if you are below the state pension age or the Pension Service if you have already reached state pension age, and then HMRC to obtain a unique 18-digit reference number. Without obtaining assistance from these official channels, it is impossible to verify which “incomplete” years are worth filling out or to make a payment with your reference number.
The extension now allows thousands of people who were previously unable to access these official helplines to wait until they can successfully reach them to confirm whether a payment will indeed enhance their state pension and by how much.
The delay of the planned 6 April price increase means that the cost of filling a full year of national insurance contributions will stay at current prices until the 31st of July.
The cost for most qualifying years was set to increase by 10.1% – in accordance with the Consumer Prices Index – from 6 April, but this will now take effect from the 1st of August. After this date, the weekly cost for all years, excluding 2021/22 and 2022/23, which will remain the same, will rise from £15.85 to £17.45. This means that the cost of filling a full year in your national insurance record will increase to £907.40.
In other words, the delay in the price increase could save you hundreds of pounds.
What does this mean for British Expatriates?
The challenge of establishing contact with the relevant helplines is accentuated for those living overseas for obvious reasons. Generally speaking, expatriates are also more likely to have significant gaps in their NI record as, unless they opted to make voluntary contributions on departure, in most cases, the gap will have existed since they last resided in the UK.
Depending on individual circumstances, it is also highly possible that an individual living and working overseas can qualify to pay class 2 rather than class 3 contributions – these Class 2 contributions are payable at a significantly lower cost than standard class 3 ones. Applying for class 2 does add another step into the process. However, you need to receive approval/confirmation from HMRC that you qualify before starting the process to make those payments.
Here at Hoxton, we have been inundated with requests from clients for assistance, as awareness of the April deadline has grown over the past weeks and months. For many people, acting on these back payments now is simply the difference between getting a full state pension in retirement and not. It is highly unlikely that the opportunity to backpay as far as 2006 will be offered again. Of course, the number of years that people have left to make future voluntary contributions before they reach normal retirement age is only ever going to reduce.
Extension is not an invitation to delay action
The extended deadline takes the short-term pressure off for those that have been panicking about this, but nonetheless, this should not be an invitation to procrastinate for a little longer. The deadline has been increased because of high demand and the capacity to handle that demand. So, the longer you leave it, the longer your case will inevitably take to work through the system.
As we have recently publicised, following the demand we have seen from clients, we have put together a packaged service to take care of this whole process for you if you feel you need help getting this whole piece done. The team at Hoxton Tax, for a small fee, will handhold you through this – beginning with finding out your gaps in NI contributions, analysing whether you need to do anything, then completing forms, arranging international courier delivery to the UK and following up to checking that payments have registered with HMRC and that your pension forecast is updated accordingly.
To download our guide on this and learn more about our UK State Pension Top-Up Service, please click the button below to get started on filling in your contribution gaps.
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