Edo

Hello everyone, I have been looking into the option of Class 2 insurance contributions to HMRC while I am living in Canada permanently. It seems like a good choice for people who won't be able to accumulate the number of years required in Canada to be able to have full state pension upon retirement. At least that way you can carry over some extra money from back home in the old age. I know everyone who has had income in the UK is entitled to some state pension even if they contributed very little into the system and even if they moved abroad but that means your payouts would be little too right.

So, at around £150 or something a year until you are 60 where you will potentially get like £7000 a year sounds like a ridiculously amazing deal.You won't get that kind of return even from the world's best performing RRSP.

But thats all that I have read in reviews and stuff which could be different to reality. So I just wanted to ask the folks on here if anyone has taken this option and is contributing into state pension back home. And is it worthwhile?

Jingsamichty

I believe you can also buy back 6 years for a lump sum payment too.

Edo

Do you know how much the payments are? And why 6 years? I'm a long way away from turning 60 so is it 6 years for everyone?

Dashie

6 years is the standard for everybody I believe, yes, although I have a feeling that the backdated payments are based on class 3, rather than class 2, and also that you have to be working to pay class 2. If you are unemployed, self employed, studying or raising children full time you have to pay class 3.

Annoys me a bit tbh. If we were there, and I was at home raising future taxpayers, I would be given credits for the first 12 years of their lives.

Edo

Alright so I'm guessing its Class 3 for expats not Class 2 right?

Dashie

Depends if you're working or not, as I said. That's how I read it anyway. Someone with better knowledge may be able to confirm and/or go into more detail.

Kaye5

"You can usually only pay for gaps from the past 6 years. However, you can sometimes pay for gaps before then depending on your age.

Living abroad and employed or self-employed immediately before leaving the UK Only if at some point you’ve lived in the UK continuously for 3 years or paid 3 years worth of contributions - you must also have been employed or self-employed abroad during the gap you’re making contributions for Class 2: £2.75 a week

Living abroad and not working in the country you moved to Only if at some point you’ve lived in the UK continuously for 3 years or paid 3 years worth of contributions Class 3: £13.90 a week"

https://www.gov.uk/voluntary-nationa...-contributions

We enquired about this and were told you could pay as a lump sum nearer retirement (I think she was saying, wait as you might be dead before then so why pay for something which you might never get). But usually it is 6 years only, which won't get you anywhere near full pension if you only have a few years in. We both have 30 years in so will have to pay 5 years Class 2 (so long as we keep working over the gap years). We did the pension calculation and it doesn't make much difference 30 years or 35. Unless we survive for a very long time after the age of 67... But we are thinking about it. Neither men nor women get UK state pension at 60 any more.

Edo

Thank you for such a detailed response.

So I just wanna make sure that I understand it correctly. Do you mean if I don't pay into National Insurance right now or in a few years, I can still pay into it later on, even when I am about to approach the retirement age or when I would be about to start claiming it?

Kaye5

To be absolutely sure, you should call Future Pensions.

I think what she was saying to me is that as I am 20 years off pension age, I don't have to pay now - think about it in say 10 years' time. I am not sure if you can just pay six years of contributions immediately before pension age or if there is a time limit for payment of each year. Also to bear in mind is the qualification about working abroad (how is it affected if you stop working).

It does seem like an amazing deal, but you should get your own pension statement and see what you would get with the years you already have, compared with what you would get after paying a further six years.

One thing to bear in mind is that they keep changing the rules - when we left the UK I had enough years for a full pension. Now I don't. Pension age is 67, what will it be in 20 years' time?

alacazam

If you go to the CAPB website British State pension eligibility, it explains exactly all about voluntary contributions and what the value is as well as the April 2016 tax changes. I have looked into this and it is a huge benefit for expats, payback for me is around 2-3 years and will continue on as long as I live.

withabix

About 93 probably

Simon Legree

And don't forget that if you have a wife who isn't from the UK she will get 60% of what you get even though she hasn't lived or worked in the UK or contributed ! It helps to compensate for the freezing of your State Pension because you live in Canada.

Kaye5

That's the impression I got from the pension lady... Kind of "don't bank on ever getting a pension, you won't live long enough"..... Or "you may live long enough to get it, but not long enough to recoup the extra you paid in voluntarily".

I will probably take the gamble and pay up. I doubt the little it costs will make much difference to the pittance I will leave behind when I fall off my perch.

Edo

Ok so the benefits of state pension outside the UK do seem quite immense, especially if your wife gets 60% of it too. The question however is whether you should just top up the difference as soon you leave the UK and stop being a resident or could you pay it close to the retirement age as Kaye suggested.

BristolUK

Probably best to leave it as late as you can. I've been in Canada just under 10 years and in that time there have been three significant changes that would affect the decision as well as the timing.