Paying National Insurance to the UK for UK Pension

[Rose Fuller]

Hi. I was advised a while ago by a friend who has also Emigrated to Australia that I should continue to pay my NI contributions to the UK to help support my UK state pension fund, and also as a back-up in-case we didn't stay in Australia forever. Does anyone have any advice/comment on this, and how I should go about it? I've been in Oz on a permanent Visa since December. I'm 40.

 

Thanks!

 

Rose.

[Guest The Pom Queen]

Hopefully Andrew from Vista Financial; will be able to advise he is the expert here

[Paul1Perth]

We had friends who caught up their National Insurance payments as they were advised to do it. There are so many factors to take into account it's hard to say what is best. It cost our friends a lot of money, the exchange rate has a massive influence on what you have to pay and get back, the rules aren't set in stone, governments can change when the pension age starts and how much you get.

 

We thought about it for a while and decided if we had spare cash we may as well put it into a super plan here. Never got to the point where we've had spare cash though.:wink:

[ramot]

I topped up my NI contributions before we retired, but this was over 12 years ago and conditions are very different now and who knows what the rules will be in over 20+ years time.

we asked for a forecast on my pension, worked out if we topped it up, and I lived till 62! (eligible to claim from 60) then I would be in credit. Luckily still here nearly 10 years later!!

However living in Oz it has been frozen at the original rate since then, but when we go on holiday to UK we contact the relevant dept. and it's increased to what the up to date rate would be, and then reduced back to the original rate when we return.

so although the pension is useful we do loose out big time over the years due to it being frozen.

this is only my opinion, but unless I was going back to live in UK at your age in the near future I would think long and hard whether it was worth it.

[Andrew from Vista Financial]

Hi. I was advised a while ago by a friend who has also Emigrated to Australia that I should continue to pay my NI contributions to the UK to help support my UK state pension fund, and also as a back-up in-case we didn't stay in Australia forever. Does anyone have any advice/comment on this, and how I should go about it? I've been in Oz on a permanent Visa since December. I'm 40.

 

Thanks!

 

Rose.

 

Hello

 

Legislation aside, it would depend on a number of factors such as current working status, working status prior to leaving UK, number of qualifying years you already have, number of qualifying years your partner has, age etc.

 

The outcome of this can then determine whether it may be beneficial.

 

Class 3 and Class 2 voluntary contributions can generally be made if someone is short of the full 30 years.

 

If accepted for class 2 contributions then generally it is beneficial to top up.

 

If only class 3 is accepted then further thought would need to be given as to the implications.

 

Regards legislation changes as ramot states, who knows what the future holds, State Pension Age in the UK has increased to age 67 and is likely to change again going forward however we are living longer so there is the play off.

 

I have recently topped my qualifying years up and I am 40 this year.

 

Regards

 

Andy

[Marisawright]

It is definitely worth considering. Think of it as an insurance policy.

 

I know it's possible pension laws will change in future but I don't think Australia is ever likely to stop means-testing the pension. That means if you've got too many assets (not including your home but including super), you may not get the full Aussie pension when you retire - whereas even in Australia, you can claim the British pension. That's a nice bit of extra income that's worth having, IMO.

 

However, to get the full British pension, you need 30 years of NI contributions (if you've got less than 30 years you get pro rata). So if you've got less than 30 years of contributions, it's worth topping them up. And it's best to do that while you're working, because then you can pay Class 2 contributions which are relatively cheap.

 

You can sign up to pay regularly from now on, and you can also back-pay up to 6 years to fill in any gaps. Obviously there's no point in buying more years once you've reached the 30.

 

I've left it a bit late - I'm now semi-retired so I'll have to pay Class 3 contributions and they're much more expensive.

[Rose Fuller]

Thanks guys, I've probably got at least 7 years to make up, and as I am working I think its worth topping up. Does anyone have details of how I do this....will the CF83 cover it?

[wolvesaussie]

I think its worth paying it if your defo not going back.. but no point doing it if you going to go back and end up getting to the 30 years anyway.. Once you are a pensioner how do they know where you live? Cant you go back an unfreeze it permanently?

[flag of convenience]

It is definitely worth considering. Think of it as an insurance policy.

 

I know it's possible pension laws will change in future but I don't think Australia is ever likely to stop means-testing the pension. That means if you've got too many assets (not including your home but including super), you may not get the full Aussie pension when you retire - whereas even in Australia, you can claim the British pension. That's a nice bit of extra income that's worth having, IMO.

 

However, to get the full British pension, you need 30 years of NI contributions (if you've got less than 30 years you get pro rata). So if you've got less than 30 years of contributions, it's worth topping them up. And it's best to do that while you're working, because then you can pay Class 2 contributions which are relatively cheap.

 

You can sign up to pay regularly from now on, and you can also back-pay up to 6 years to fill in any gaps. Obviously there's no point in buying more years once you've reached the 30.

 

I've left it a bit late - I'm now semi-retired so I'll have to pay Class 3 contributions and they're much more expensive.

 

Impossible to say though if the UK pension will remain asset free over time. I'd thought about topping mine up, even though having missed a lot of years but decided against.

[winter1]

The qualifying years will increase to 35 from around 2016 when the new flat rate pension comes in. This is to be around 144GBP plus depending on inflation till it is introduced, as opposed to the current 110GBP. It is worth getting a forecast done as you can see what benefits you gain from extra contributions. In my case I only had to pay 3 more years at around 2 pounds a week for class 2 but I assume this will be a bit more now. Your forecast will also tell you if you have any SERPS benefits, this is useful as many people will have built up a substantial extra amount. The UK Government has said that if your current forecast including SERPS is greater than the new flat rate it will honour the higher amount. Mine was already in excess of 160 and many will have more. The only poor thing is it is frozen at the rate when you first draw it. However one day we may see this change as the campaign hots up. For those that doubt that remember many people from India the West Indies and other countries often want to return to their country of birth as they get older, and this would actually be cheaper for the UK as it would save on housing benefits health costs etc. There is a strong campaign going on from these countries which may eventually bear fruit.

 

Also as for means testing the UK pension as it is deemed contributory The European courts have already ruled that anyone paying in is entitled to it, but ruled in favour of the UK government that it can freeze it in certain countries. It would seem almost inconceivable that the UK would means test. It would be political suicide on current expectations, however you can never rule it out entirely. Although the raise in the age it can be drawn at is being raised in steps to 67 in 2028 the rise to 70 in the UK quoted by Joe Hockey is not envisaged till 2060.