Gbye grey sky Posted March 2, 2015 Share Posted March 2, 2015 Folks, Am currently speaking to a pensions expert regrading my Teacher Pension where I have 26 years service to date. We don't know if we are moving short term or for good so will be interesting what advice he offers. We have paid a fee up front so it isn't as if he is on comission to move our money. With regards to state pension I had assumed it would be frozen at the point that I leave the UK - five weeks to go. Am I reading this right that I could pay Class 2 contributions of £700 approximately a year to maintain my UK state pension and that it would therefore increase untilI reach retirement age? The joys of financial planning Bear His advice had better come quick because you only have until the end of the month to transfer your pension to a SIP which would then allow you to transfer it to an Australian Super. I paid for advice on my 30 year civil service pension. Remember that they potentially make even more money if you then transfer your pension so you can expect them to recommend that course. Look at all the numbers carefully I suggest and make up your own mind. The state pension is frozen from the time that you draw it. I can take mine in 13 years time at the age of 67. You get whatever the pension is at that time reduced if you havent made full contributions. Link to comment Share on other sites More sharing options...
Marisawright Posted March 2, 2015 Share Posted March 2, 2015 The rules on this seem to have been relaxed since I last looked, according to the updated gov.uk website... it used to be that you had up to 6 years to pay in arrears, now if you're lucky enough to be born after 1951 it looks like you can take even longer. Yes that does seem to have changed. When I got my letter last year, it was very clear that once you'd passed those 6 years that was it. Now it seems you can still go further back if you're willing to cough up the extra. However I'm not sure the increase would count as "slight", particularly if you have a lot of years to make up. I agree everyone's individual. However I'd think anyone would be foolish not to make the most of it. It's a unique way to create a safety net for yourself in case of financial disaster in your old age at a fairly reasonable cost. If there's any chance you may go back to the UK before you reach retirement age, you can't rely on the Australian pension as a substitute (because you have to be in Australia to claim it). The thing is to work out how many years you need to pay, then ensure you pay the minimum years at the minimum possible cost. Link to comment Share on other sites More sharing options...
vickyplum Posted March 2, 2015 Share Posted March 2, 2015 Yes, that's the bit I struggle with. I have absolutely no idea if we will stay in Australia for the rest of our lives, or return to the UK, or do a bit of ping pong... 15+ years from now is something I have no clue on, whatsoever! I mean 25+ years from now... How to age myself by 10 years with one mistyped character! Link to comment Share on other sites More sharing options...
BearnBob Posted March 2, 2015 Share Posted March 2, 2015 Very aware of the deadline implications and we have discussed the real possibility that not transferring might well work best for us given our circumstances: had I gone for a no fee advisor then I am sure of the answer i would have been given! Might I ask if you transferred your pension and are you in Oz to stay? I had thought that my state pension would be frozen from the time I left Australia. Paying NI would therefore seem to ensure index linked increase until 67 as things stand. Bear Link to comment Share on other sites More sharing options...
ramot Posted March 2, 2015 Share Posted March 2, 2015 I'll repeat what I wrote before about my state pension. I was eligible at 60 then, so 2 years before paid in approx. 2000gpds, which was all I could do then, 2years after receiving my pension, the increase even on a frozen pension I was then ahead, and now another 8 years on, definitely ahead. we go back to UK most years for 2/3 months, and get our state pensions increased to what they would be had we stayed in UK, while we are there. they then reverse back to original amount on our return to Oz!!! bit it's a nice extra every year even though only for a short time. Link to comment Share on other sites More sharing options...
Fisher1 Posted March 2, 2015 Share Posted March 2, 2015 We don't live in Australia and never have, but had a similar decision to make way back in 1985 when we moved to live in Luxembourg. My UK state pension payments were maintained through my employment (long story and totally irrelevant here) but my husband was left to his own devices. At that time you weren't allowed to make voluntary contributions to the UK state pension till you had been away a full year, but at the end of that year we discussed it and decided that, as we probably would come back at some point, he would pay the second class contributions. He already had 15 years in but in 1986 men still had to have 44 years to get a full state pension, so we did wonder if it would be worth it. Still, we went ahead on the grounds that it would be a 'safety net'. Instead of staying our planned three/four years in Luxembourg, we stayed fifteen years, then did another nine years in Brussels. We did eventually return to the UK after twenty four years - and by then the rules had changed and my husband had already paid enough to get a full pension. Next month he will start reveiving 118 pounds a week from the state. Was it worth it? Oh yes. Even if we eventually move to Australia to join our daughter, it will still have been worth it. Set up a direct debit and then try to forget about it ... after a bit you get used to the money going out each week. Do it!!!! Link to comment Share on other sites More sharing options...
akiralx Posted March 3, 2015 Share Posted March 3, 2015 I have asked for a missing years report. But how much do you pay, do they work it out and send you a bill? Link to comment Share on other sites More sharing options...
Fisher1 Posted March 3, 2015 Share Posted March 3, 2015 Oh sorry, my husband has just told me he paid third class not second class contributions. He said it was about twenty five pounds a month, but we cant remember exactly. He wasn't buying any years back though, just keeping up to date. I've heard that its worth buying back missing years, but have no experience of it. The consensus seems to be though that if you can pay in, its worth it. It certainly has been for us. Its also worth keeping track of missing pensions - if you have moved jobs a bit, you can have bits of money invested all over the place ... it can make a nice little extra to find you get a couple of hundred pounds a month from some pension scheme you paid into for eight years donkeys ages ago. Link to comment Share on other sites More sharing options...
Marisawright Posted March 3, 2015 Share Posted March 3, 2015 I have asked for a missing years report. But how much do you pay, do they work it out and send you a bill? They tell you how much you owe for each individual year, then it's up to you to decide which you want to pay. Just add them up and send a cheque to the address they give you. Link to comment Share on other sites More sharing options...
Paul1Perth Posted March 4, 2015 Share Posted March 4, 2015 OK I'm doing the maths here, and point taken... even a few thousand paid now could be guaranteed to be worth much more later, if you live to a ripe old age. There are so many things to take into account that it's not an easy calculation. You would pay tax on any money that comes in from the UK, there is the exchange rate to consider, there are advantages (I think) if you can transfer the money into a current super scheme you have here. I think there are different tax rules depending on age too. I'm just moving my super to a transition to retirement and looking into whether it's worth also paying more to top up my NI. Depends where you can get your money to work best for you really and where you are going to get less tax. If you can afford to put some money into your mortgage, for example, you might save yourself a few thousand there in the long run. I cashed in my NCB pension when I got to 55 and got a decent lump sum and a payment every month for the rest of my life, which fluctuates with the exchange rate. It's a tough call knowing what to do. My wife is going to a talk today and had a number of questions written down for the speaker. I find that there are heaps of companies out there that will help you transfer your money, but they all want a fee. You can do it yourself but it's not easy to work out. Link to comment Share on other sites More sharing options...
Marisawright Posted March 4, 2015 Share Posted March 4, 2015 You would pay tax on any money that comes in from the UK, there is the exchange rate to consider, there are advantages (I think) if you can transfer the money into a current super scheme you have here. . The big problem with super is that you don't know how long you're going to live, so it's very hard to know how much pension to award yourself. Do you take enough to be comfortable and risk running out, or should you be really conservative and frugal so it'll last until you're 95 (and then you die at 80)? Since it's also market-related, you never know when there might be another GFC which could wipe it out. With that in mind, topping up NI was a no-brainer for me. It means I can be a bit more generous with my super pension, knowing I'll have the UK pension as a safety net if my super starts running low or if there's another stockmarket crash. Sounds like that's not such an issue for you since you've got some kind of guaranteed regular payment anyway. Link to comment Share on other sites More sharing options...
shaunfreo Posted March 4, 2015 Share Posted March 4, 2015 You want voluntary class 3 contributions, they send a bill at the end of the financial year, and it goes up each year, also you can only pay with a British cheque so you still need an account there, or have somebody who can pay for you and you transfer money to them. good luck Link to comment Share on other sites More sharing options...
Paul1Perth Posted March 4, 2015 Share Posted March 4, 2015 The big problem with super is that you don't know how long you're going to live, so it's very hard to know how much pension to award yourself. Do you take enough to be comfortable and risk running out, or should you be really conservative and frugal so it'll last until you're 95 (and then you die at 80)? Since it's also market-related, you never know when there might be another GFC which could wipe it out. With that in mind, topping up NI was a no-brainer for me. It means I can be a bit more generous with my super pension, knowing I'll have the UK pension as a safety net if my super starts running low or if there's another stockmarket crash. Sounds like that's not such an issue for you since you've got some kind of guaranteed regular payment anyway. There's also the Australian pension to think about too. We are lucky enough to live in a country where you aren't going to starve. It's asset and income dependant so the rates change depending on how well off you are. Your house isn't included in the assets though. Rates below, didn't think they were too bad. [TABLE] [TR] [TH=colspan: 5, align: center]Family Situation[/TH] [/TR] [TR] [TH]Pension rates (per fortnight)[/TH] [TH]Single[/TH] [TH]Couple each[/TH] [TH]Couple combined[/TH] [TH]Couple each separated due to ill health[/TH] [/TR] [TR] [TD]Maximum basic rate[/TD] [TD]$776.70[/TD] [TD]$585.50[/TD] [TD]$1,171.00[/TD] [TD]$776.70[/TD] [/TR] [TR] [TD]Maximum Pension Supplement[/TD] [TD]$63.50[/TD] [TD]$47.90[/TD] [TD]$95.80[/TD] [TD]$63.50[/TD] [/TR] [TR] [TD]Energy Supplement[/TD] [TD]$14.10[/TD] [TD]$10.60[/TD] [TD]$21.20[/TD] [TD]$14.10[/TD] [/TR] [TR] [TD]TOTAL[/TD] [TD]$854.30[/TD] [TD]$644.00[/TD] [TD]$1,288.00[/TD] [TD]$854.30[/TD] [/TR] [/TABLE] Link to comment Share on other sites More sharing options...
PomCat Posted March 4, 2015 Share Posted March 4, 2015 Voluntary Class 3 contributions can be paid electronically through your Australian Bank account. They calculate the amount in Aus Dollars and add a small fee. You need to have all the correct details though, address of recipient, your NI number, the year/s that the payment relates to, etc. Also, for those wondering if they should add to their current years, it is worth remembering that you are entitled to a part pension based on the number of years paid versus the number required for a full pension. Therefore, if you only needed 30 years for a full pension but had just 20 years of contributions, you would receive 2/3 of the full rate (around $75 pw currently). As others have said, the pension is indexed and increases each year but not for those residing outside of the Uk or a number of countries in a list that the Government publishes (the list does not include Australia or Canada and pension rates are indeed frozen at the rate they commence). There are representations made to the UK Government and, I believe, there hve been unsuccessful legal challenges to this ruling. The UK pension is not means tested, which makes it an attractive option for those eligible to buy into it. When combined with the Australian penion and private superannuation, it is taken into account for the Australian pension assets and income tests (which means it can reduce the amount you get). There is plenty of easy to understand material on the UK Government website. Link to comment Share on other sites More sharing options...
Marisawright Posted March 4, 2015 Share Posted March 4, 2015 There's also the Australian pension to think about too. We are lucky enough to live in a country where you aren't going to starve. It's asset and income dependant so the rates change depending on how well off you are. Your house isn't included in the assets though. Rates below, didn't think they were too bad. [TABLE] [TR] [/TR] [TR] [TH]Pension rates (per fortnight)[/TH] [TH]Single[/TH] [TH]Couple each[/TH] [TH]Couple combined[/TH] [TH]Couple each separated due to ill health[/TH] [/TR] [TR] [TD]Maximum basic rate[/TD] [TD]$776.70[/TD] [TD]$585.50[/TD] [TD]$1,171.00[/TD] [TD]$776.70[/TD] [/TR] [TR] [TD]Maximum Pension Supplement[/TD] [TD]$63.50[/TD] [TD]$47.90[/TD] [TD]$95.80[/TD] [TD]$63.50[/TD] [/TR] [TR] [TD]Energy Supplement[/TD] [TD]$14.10[/TD] [TD]$10.60[/TD] [TD]$21.20[/TD] [TD]$14.10[/TD] [/TR] [TR] [TD]TOTAL[/TD] [TD]$854.30[/TD] [TD]$644.00[/TD] [TD]$1,288.00[/TD] [TD]$854.30 [/TD] [/TR] [/TABLE] True, but on this thread we're talking about people who may or may not stay in Australia in retirement. If you leave Australia before retirement age you're not eligible for the Australian pension at all - so if you haven't kept up your UK pension, you've got nothing. Also to put what I'm talking about in perspective - each year of NI contributions costs less than ₤1,000. Most people who come to Australia have already paid a good few years, so they may have 10 or 15 years to make up. That's going to cost a maximum of ₤15,000 (probably a lot less). In return for that investment, they'll get ₤10,000 per year from retirement age until they die, which could easily be 30 years. There is nowhere else you could invest ₤15,000 and get back ₤300,000 Link to comment Share on other sites More sharing options...
Marisawright Posted March 4, 2015 Share Posted March 4, 2015 You want voluntary class 3 contributions, they send a bill at the end of the financial year, and it goes up each year, also you can only pay with a British cheque so you still need an account there, or have somebody who can pay for you and you transfer money to them. good luck You can pay with any cheque provided it's in British pounds. You can ask your Australian bank for one. Link to comment Share on other sites More sharing options...
akiralx Posted March 18, 2015 Share Posted March 18, 2015 True, but on this thread we're talking about people who may or may not stay in Australia in retirement. If you leave Australia before retirement age you're not eligible for the Australian pension at all - so if you haven't kept up your UK pension, you've got nothing. Also to put what I'm talking about in perspective - each year of NI contributions costs less than ₤1,000. Most people who come to Australia have already paid a good few years, so they may have 10 or 15 years to make up. That's going to cost a maximum of ₤15,000 (probably a lot less). In return for that investment, they'll get ₤10,000 per year from retirement age until they die, which could easily be 30 years. There is nowhere else you could invest ₤15,000 and get back ₤300,000 Question - how much UK state pension could you receive before breaking the income test for the Aus pension? I will be in Aus at retirement so could claim the latter (only have a small amount of super at the moment after 5 years' employment but paying extra contributions) - so I would have to decide whether it would be worth topping up the NI to receive a higher UK state pension if that is just going to be deducted from the Aus pension. I currently have 20 years' NI history. At the moment (age 48) my inclination is to live in the UK in retirement. Link to comment Share on other sites More sharing options...
mungbean Posted March 18, 2015 Share Posted March 18, 2015 Question - how much UK state pension could you receive before breaking the income test for the Aus pension? Details are here http://www.humanservices.gov.au/customer/enablers/income-test-pensions Link to comment Share on other sites More sharing options...
Marisawright Posted March 18, 2015 Share Posted March 18, 2015 Question - how much UK state pension could you receive before breaking the income test for the Aus pension? I will be in Aus at retirement so could claim the latter (only have a small amount of super at the moment after 5 years' employment but paying extra contributions) - so I would have to decide whether it would be worth topping up the NI to receive a higher UK state pension if that is just going to be deducted from the Aus pension. I currently have 20 years' NI history. At the moment (age 48) my inclination is to live in the UK in retirement. So, when would you plan to move to the UK? You say you'll be in Aus "at retirement" but do you mean "I'll be in Aus until I give up work" or "I'll stay in Aus until I'm 70" (which is the age you can claim the Aussie pension)? The reason I ask is that if you retire to the UK before the Australian retirement age, you won't be able to collect the Australian pension AT ALL, so you will need the full UK pension. The actual rule is that you must have two years' residency around the time you claim the pension. So if you've been living in Australia for two years, then you can go to Centrelink and claim the pension, and leave the country the next day. But if you've been living overseas and come back to Australia to claim the pension, you must then remain resident for a full two years, or they'll take it away again. You can see that it wouldn't be practical to go back to the UK, then come back to Oz for two years to claim the pension, then go back again. Leaving aside the fact that you'd be 70 years old, the costs associated with moving back and forth would wipe out the benefit of the pension! Link to comment Share on other sites More sharing options...
akiralx Posted March 18, 2015 Share Posted March 18, 2015 So, when would you plan to move to the UK? You say you'll be in Aus "at retirement" but do you mean "I'll be in Aus until I give up work" or "I'll stay in Aus until I'm 70" (which is the age you can claim the Aussie pension)? The reason I ask is that if you retire to the UK before the Australian retirement age, you won't be able to collect the Australian pension AT ALL, so you will need the full UK pension. The actual rule is that you must have two years' residency around the time you claim the pension. Oh, yes - I know that. I would remain in Aus until then, maybe after giving up work 2-3 years earlier and hopefully managing to survive on super and other investments - probably downsizing our house. The asset test shouldn't be an issue, but I might have to commute a small UK occupational pension to a larger lump sum to avoid exceeding the income test - I assume they include overseas benefits in these tests? Not sure how they check though... Link to comment Share on other sites More sharing options...
Marisawright Posted March 18, 2015 Share Posted March 18, 2015 Oh, yes - I know that. I would remain in Aus until then, maybe after giving up work 2-3 years earlier and hopefully managing to survive on super and other investments - probably downsizing our house. The asset test shouldn't be an issue, but I might have to commute a small UK occupational pension to a larger lump sum to avoid exceeding the income test - I assume they include overseas benefits in these tests? Not sure how they check though... Just a thought, the British pension starts at 65, and is not means tested, so you'd be able to start collecting it immediately - which would help you in that interim period between retirement and starting to get the Aussie pension. That makes paying Class 2 contributions a no-brainer. Even if you pay them every year from now till retirement they're not likely to cost you more than $10,000. In return, you'll get 5 years of UK pension. At current rates that's $75,000. That's quite a profit!! In that case, you don't really care whether the UK pension reduces your Aussie pension or not. The Aussie pension will only be reduced by the amount of the UK pension so you can't be worse off. Commuting a pension to a lump sum wouldn't help, in fact it might make things worse - money in the bank is an asset! You could gamble that they won't check, but if you get caught out it could be painful. The mother of a friend of mine had a widow's pension from overseas which she didn't declare and they did finally find out about it (no idea how). She now has $25,000 to pay back and they were going to simply stop paying her Oz pension until the debt was paid. Luckily she was able to get that changed and she is now paying it back in instalments. Try pasting the figures into this calculator, it will give you an idea. http://yourpension.com.au/APCalc/index.html Link to comment Share on other sites More sharing options...
akiralx Posted March 18, 2015 Share Posted March 18, 2015 Just a thought, the British pension starts at 65, and is not means tested, so you'd be able to start collecting it immediately - which would help you in that interim period between retirement and starting to get the Aussie pension. That makes paying Class 2 contributions a no-brainer. Even if you pay them every year from now till retirement they're not likely to cost you more than $10,000. In return, you'll get 5 years of UK pension. At current rates that's $75,000. That's quite a profit!! In that case, you don't really care whether the UK pension reduces your Aussie pension or not. The Aussie pension will only be reduced by the amount of the UK pension so you can't be worse off. Commuting a pension to a lump sum wouldn't help, in fact it might make things worse - money in the bank is an asset! You could gamble that they won't check, but if you get caught out it could be painful. The mother of a friend of mine had a widow's pension from overseas which she didn't declare and they did finally find out about it (no idea how). She now has $25,000 to pay back and they were going to simply stop paying her Oz pension until the debt was paid. Luckily she was able to get that changed and she is now paying it back in instalments. Try pasting the figures into this calculator, it will give you an idea. http://yourpension.com.au/APCalc/index.html Yes, good point about the UK pension, though won't it be from age 67 or later? I'm sure I will pay the NI contributions. The thing I'm considering is that I'll still be under the asset test with the commuted pension, but would break the income test if taken as a pension. Link to comment Share on other sites More sharing options...
Keith and Linda Posted March 18, 2015 Share Posted March 18, 2015 The age British pensions start are increasing, mine, I believe is at age 66, as I was born in Feb 1955. but you can check this out quite easily on the Gov web site. Link to comment Share on other sites More sharing options...
LC2 Posted March 18, 2015 Share Posted March 18, 2015 Hi Guys, I haven't read through every post on here but thought I'd wade in with some pension info as I'm in the field. Obviously as people have mentioned, making additional NIC can guarantee you a lifetime pension but there are pros and cons to both. The State Pension is an end of life annuity that pays until you die, these types of annuities could also be purchased with a lump sum, say from your super pot if you wished to. To get an idea of what the equivalent would cost you, you can find online annuity pricers, just make sure you tick inflation linked and then you have the equivalent (or near to it). You'll notice that the numbers seem relatively large, but what you're doing is effectively paying a premium to the annuity provider for them bearing the investment risk and the longevity risk (risk of you living longer). Really you have three options - 1) Pay additional NIC and receive UK state pension 2) Purchase annuity with your super money 3) Build super and then drawdown from that. To make an informed decision you need to weigh up the following factors: Health - Have you had a serious condition in the past, do you smoke a lot, drink a lot etc? The questions we normally view as negative and are prone to bending the truth on would actually save you money on an annuity as they infer a higher probability of early death and hence a cheaper annuity. Investment - Do you take an active approach to your investment. Passing the money over, either to the Treasury or an annuity provider reduces your risk on the downside but also can result in you losing the upside in positive market conditions. Flexibility - NIC is pretty inflexible, if for example you want to work an extra few years, you can increase payout but conversely you can't draw it earlier than the ever increasing NRA (Normal Retirement Age). Purchasing an annuity from an insurer gives you a little more flexibility and you can tailor a solution i.e. spouse pensions, death benefits, but ultimate flexibility is offered by a drawdown Interest Rates - Annuities are relatively expensive at the moment compared to historic standards as interest rates are low. This means the insurer requires more money upfront as it can't produce a great return on the funds you pass to then pay you. Here the UK government system wins as the contribution rate is independent of interest rates. Tax - If you pay into your UK pension with money earned in Oz you'll be double taxed. You've already paid income tax in Oz and then you get taxed as income when you receive the pension in the UK. If you earn it in the UK then it goes in tax free. If you put in your Super here then you pay part tax on the way in and part on the way out. It's quite complex and individual circumstances apply. I know I may have complicated the matter a little but I don't mind responding to individual questions. Link to comment Share on other sites More sharing options...
Marisawright Posted March 18, 2015 Share Posted March 18, 2015 Obviously as people have mentioned, making additional NIC can guarantee you a lifetime pension but there are pros and cons to both. The State Pension is an end of life annuity that pays until you die, these types of annuities could also be purchased with a lump sum, say from your super pot if you wished to. But surely, the cost to "buy" a UK state pension is far, far less than it would cost you to buy a lifetime annuity? The cost to pay Class 2 contributions for 20 years is less than $10,000, which gives you an annuity of (currently) around $7,000 a year for life. Where else can I buy an annuity of that amount with $10,000? I agree state pensions are not going to give you a comfortable lifestyle so a wise person will look at investing in such things in addition. Alternatively, if you can show me where else to invest $10,000 at age 50 and collect $7,000 a year from age 70, I'd love to hear about it. Link to comment Share on other sites More sharing options...
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