Rachel Reeves’ new rules mean expats will be forced to pay more if they want to top up their UK state pension. The Chancellor said in her Budget that from April, people will need to live in the UK for a decade to meet the threshold for a full pension and have to pay £910 per year to top up their National Insurance.
To receive the full state pension, you need to make National Insurance Contributions (NICs) for 35 years. You can « buy » extra years of NICs if you have gaps in your NI record. Currently, there are two options for expats who want to top up. Class 3 NIC costs £17.75 per week, or £923 per year, while Class 2 NIC costs £3.50 per week, or £182 per year.
The first option is for anyone who lives outside the UK who used to work in the country as either an employee or as self-employed.
Class 2 is limited to those who were self-employed in the UK just before they upped sticks, and lived in the UK for a minimum of three years.
Class 2 is also currently available to expats who are self-employed in the country they moved to, and can prove it.
But from April 6, Class 2 will no longer be available, while Class 3 will only be for those who have lived and worked in the UK for at least 10 years before moving overseas. It will cost £910 per annum.
Carl Walker from the Jersey Consumer Council told the BBC in November that it came as no surprise that the Chancellor made the move.
He said: « It was a great opportunity for people to take advantage of a very unusual policy which allowed people to make a lot of money out of the UK state pension, and it’s no surprise it’s been shut. »
Graham Parrott from Guernsey-based Fitzroy Tax Services told the broadcaster some people had argued those who don’t live in the UK shouldn’t be entitled to the state pension.
Mr Parrott added: « But I think it’s perfectly right because you earned it while you were there. »
Experts have advised expats who want to pay Class 3 NICs into the system should do so quickly, while it is still possible.
Alistair Spence Clarke from tax and labour consultancy Spence Clarke said if you only worked in the UK for four years, you can still benefit if you act quickly.
He said this is because you can pay six years in one go and secure 10 years of contributions and a UK state pension of about 30% of the full pension.
The Chancellor’s move divided opinion on social media in the immediate aftermath of the Budget.
On Reddit, one user wrote: « [A thousand pounds] per year might be doable if you’re living in the UK with UK wages and have no conversion rates to deal with, but can be astronomical if you’re living elsewhere. Fair or not, this extra cost is going to be rough on a lot of people. »
However, another Reddit user commented: « As a Brit living abroad, I think the way they allowed people to make voluntary contributions to buy years at a very low rate was quite scandalous.
« It’s bad enough allowing it for Brits that have come to live and work elsewhere for a few years, but the fact that it also applied to foreign nationals whose only connection to the UK might have been coming to work for a few years themselves before going back to their own country or whatever is even more ridiculous. »
