NATIONAL INSURANCE

NATIONAL INSURANCE

Expats may be able to contribute towards the State Pension scheme in the country where they work and reside. If you’ve lived or worked in another country in the past, you might be eligible for that country’s state pension and a UK State Pension. To check if you can pay into or receive another country’s state pension, contact the pension service for that country.

It’s possible to collect your State Pension if you retire abroad. The process is straightforward if you live in the EEA, Gibraltar, Switzerland and certain countries that have a social security agreement with the UK. Furthermore, these countries have a social security agreement with the UK that allows for cost of living increases to the State Pension, meaning you will get an increase in your pension each year.

The UK has social security agreements with Canada and New Zealand, but you cannot get a yearly increase in your UK State Pension if you live in either of those countries.

HMRC will pay your UK State Pension into any worldwide bank account in any currency. However, you may be leaving money on the table with regards to exchange rates and transfer fees.

Leaving pensions and retirement plans back in your home country is always an issue. Our trained financial advisors can help you decide whether a consolidation or move is best for you.

Expats may be able to contribute towards the State Pension scheme in the country where they work and reside. If you’ve lived or worked in another country in the past, you might be eligible for that country’s state pension and a UK State Pension. To check if you can pay into or receive another country’s state pension, contact the pension service for that country.

It’s possible to collect your State Pension if you retire abroad. The process is straightforward if you live in the EEA, Gibraltar, Switzerland and certain countries that have a social security agreement with the UK. Furthermore, these countries have a social security agreement with the UK that allows for cost of living increases to the State Pension, meaning you will get an increase in your pension each year. The UK has social security agreements with Canada and New Zealand, but you cannot get a yearly increase in your UK State Pension if you live in either of those countries.

HMRC will pay your UK State Pension into any worldwide bank account in any currency. However, you may be leaving money on the table with regards to exchange rates and transfer fees.

Leaving pensions and retirement plans back in your home country is always an issue. Our trained financial advisors can help you decide whether a consolidation or move is best for you.

UK State Pension and National Insurance (NI)

Entitlement to a UK State Pension, both basic and new, and certain other social security benefits, and the amount you will receive, is dependent on your National Insurance (NI) record.

To get the full basic State Pension you need a total of 30 “qualifying years” of NI contributions or credits. This means you were either:

* working and paying NI;

* getting NI Credits, for example for unemployment, sickness or as a parent or carer;

* paying voluntary NI contributions.

You can check your NI record online to find out what you’ve paid up to the start of the current tax year, any NI credits you’ve received, if gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t qualifying years) and if you can pay voluntary contributions to fill any gaps – and how much this will cost. Your online record doesn’t cover how much State Pension you’re likely to get, making it somewhat difficult to account for it in your retirement planning.

Contribution gaps can be explained by being unemployed and not claiming benefits, or by earning below the contributions threshold for both employed or self-employed status. Or simply by ceasing contributions when you move abroad, which is the case for many expats. Gaps can mean you may not have enough qualifying years to get the full State Pension.

If you have fewer than 30 qualifying years, your basic State Pension will be less than £125.95 per week but you might be able to top up by paying voluntary contributions.

Up to 6 years’ voluntary contributions can be paid. Generally, eligible expats can make voluntary contributions which count towards your basic State Pension when you retire and entitle you certain benefits if and when you return to the UK. There are also deadlines and time limits for paying voluntary contributions. However, HMRC has extended the time limit if the person reaches State Pension age on or after 6 April 2016 and makes payment by 5 April 2023. The rates payable will depend on the timeframe in which contributions are made.

But is it worth it? Our opinion is yes, based on the following calculations:

As of February 2019, the full UK basic State Pension is currently £164.35 per week or £8,546.20 per year. To receive this amount you require 35 full qualifying years.

Class 2 voluntary contributions are £2.65 per week or £137.80 per year.

Class 3 voluntary contributions are £13.25 per week or £689 per year.

The average life expectancy in the UK is currently 86, so someone receiving full state pension benefits will receive £179,466 over the course of their retirement.

On average, expats we come across are missing 10 years of contributions. Assuming they also live to be 86, they would receive £128,184 over the course of their retirement. That’s £51,282 less than the full amount.

If such an expat had made 10 years worth of Class 2 voluntary contributions, it would cost them £1,378. Assuming they live to 86, that’s a return of 3,721.48% on what they paid in.

Our experts are here to help you review your NI record and evaluate your options, and then to assist you in taking the best course of action.

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