How to Top Up UK a State Pension for UK Expats
UK state pensions can always be topped up by expats, and before the tax year end to avoid missing a year of pension credit. ProACT Sam discusses UK state pensions post Brexit and how British expats can top up their UK state pension.
All British expats should continue to contribute to UK state pension when living and working abroad and should register to start paying when they first leave the UK to avoid losing state pension income benefits at retirement age.
Working Abroad
The UK National Insurance is a tax efficient way of contributing towards your state pension for expats running a business abroad.
If you do register to pay National insurance at the time of relocating, then you could pay under Class 2 rules which offers pension and some benefit entitlements. In order to pay Class 2 contributions you must have been living in the UK prior to relocating overseas.
If you own a business or are a sole trader abroad, remember that national insurance can be a business expense.
Expats working short contracts less that 3 years in the UK need to consider and review their options and entitlements when relocating.
Living Abroad
If you aren’t working abroad, for example if you are retired, you can only pay voluntary class 3 contributions assuming that you lived in the UK for at least 3 years, worked and paid national insurance contributions in the UK.
Full pension
UK citizens or tax residents with 35 years of qualifying national insurance contributions will receive a full state pension, even if this includes periods, living and working abroad.
How much are voluntary national insurance contributions in 2023/24?
Class 2
Class 2 contributions are for expatriates living and working abroad.
Class 2 contributions are normally paid by self employed people in the UK, however that can also be paid by people living & working abroad who wish to maintain their national insurance record providing that you worked in the UK immediately before leaving the UK and have paid at least 3 years of contributions.
For 2023/24 Class 2 National Insurance contributions are £3.45 per week.
Class 3
Class 3 contributions are for expatriates who live but do not work abroad.
Class 3 National Insurance contributions are a type of voluntary payment that individuals can make to fill gaps in their National Insurance record. This can be important because the amount of certain state benefits, including the State Pension, depends on your National Insurance record.
For 2023/24 Class 3 National Insurance contributions are £17.45 per week.
How much is the UK state pension?
The new UK state pension paid is £203.85 per week for people reaching State Pension age on or after 6 April 2016.
Prior to 6 April 2016 most pensions received basic pension, sometimes at £156.20 per week, which was then supplemented with an additional amount based on your earnings & how much you contributed.
Changes introduced over the last 15 years included a new state pension rate for all, which is indexed linked and paid for a lifetime.
If you reached State Pension age before 6 April 2016 you may receive different payments but going forward only the new state pension at £203.85 per week is available at your state retirement age.
There is now no widows pension, when you die all benefits are lost.
Pension increases abroad
UK State Pension’s is an index linked benefit if you are tax resident in the UK, or certain other countries including European Economic Area (EEA) countries & Switzerland.
The EEA includes EU countries plus Iceland, Liechtenstein & Norway.
Outside Europe there are other countries where bilateral agreements allow for your state pension to rise every year. This includes USA, Turkey & the Phiippines along with the Isle of Man, Gibraltar & Guernsey.
You will not receive an increase in your state pension in countries like Australia, Canada, New Zealand or India.
Pension savings return paid
For each years national insurance contribution paid, an increase of index-linked pension benefit of £300 per year is assured.
Paying Class 2 national insurance while living and working abroad generates a pension benefit with a lower contribution (£3.45 per week) and also confers other benefits including maternity, bereavement and support allowances.
Paying Class 3 voluntary rate national insurance while living, but not working, abroad, will return your capital within three years of receiving your state pension and then continue to pay indexed pension for life, with no additional benefits allowed.
10 year catch up rule
Expatriates have until 5 April 2025 to pay voluntary contributions to make up for gaps in national insurance records between April 2006 & April 2016. From 6 April 2025 you will only be able to make voluntary payments for the previous 6 year.
Key points on National insurance back payments for expatriates
New expats leaving the UK to work should register for Class 2 national insurance payments when they first start living and working abroad
Existing expatriates, or an expatriate not working abroad, will always pay Class 3 National Insurance payments
In any tax year, an expat can top up to 7 years: the current tax year end the previous 6 years .
Before 5/4/2025 an expat could backdate an additional 10 years of of contributions for years between 2006 & 2016, these contributions are offered under special rules which close absolutely after 5/4/2025
UK Expats may be able to transfer social or national insurance contributions made abroad to or from the UK to enhance their State pension benefit
Help & guidance
ProACT Partnership is a firm that specialises in providing expatriate advice for those living and working abroad.
Known as the "Expat Experts," we offer comprehensive guidance on a wide range of topics, from tax planning and asset protection to international property investment and immigration law.
Our team of seasoned professionals are adept at navigating complex international regulations, ensuring our clients stay compliant while optimising your financial and legal position.
Our services are tailored to meet the unique needs of expatriates, helping you navigate unfamiliar landscapes, understand local laws, and make the most of their overseas opportunities.