Hi all,
I have two queries regarding paying National Insurance contributions back in the UK and claiming state pension at retirement age.

1). I just received a letter from HMRC stating that I hadn’t paid any NI contributions for the year 2010-2011. This was because I have been living and working in Australia since 2009. My initial reaction was well that’s bloody obvious, but upon further reading of the letter it stated that with payment of 30 years worth of contributions I would then be eligible for a UK state pension at retirement age. I have paid 25 years worth of contributions, so for an extra 5 yearly payments of (approx) £600 I would than be eligible for a state pension, as well as my superann pension here. I have 21 years till retirement (assuming retire at 65).

I am considering making the payments and using the UK pension to supplement my superann payments (although I do top up my superann payments, it will still be nowhere near the figure I would like when it comes to retirement). Is it worth making the payments to the HMRC or is this a false economy?

2). My wife worked for the NHS and has a NHS superann policy in the UK, as well as her Australian superann here. She has dual nationality, but only has paid approx. 15 years worth of UK contributions. I assume even with the NHS superann, she also still qualifies for a UK state pension? And if so, she has only paid approx. 15 years worth of contributions so would have to make up the difference accordingly? Again, would this be worthwhile or is it another false economy? While the amount she has in the NHS policy is substantially more than mine, it still would not be enough for retirement.

Many thanks in advance for any replies.

Just to throw into the mix....do you have or will you be getting Oz citizenship?

If so you will qualify for Oz aged pension at 65 if you have been a citizen for 10 years. This is means tested however, so with superan and UK pension, it might be reduced to zero.

I've heard mixed responses on paying the extra N.I. but I think it would be worth it.

Bear in mind as well that your UK pension will be frozen at what ever level it is first paid to you. It won't increase with inflation as you have left the country.

I don't think your wife will qualify for UK aged pension. You need to pay in 30 years worth. (Still, that's better than the 48 that is used to be!).

With non index linking of your UK aged pension, fluctuating exchange rates and so on, you Aussie aged pension will help to top up any shortfall, when that time comes.

For five years you will pay around £3,000. This will get you an extra sixth of the UK pension. You only have to live a few years past UK pension age to make this a very good investment!

So I would say yes, pay the voluntary contributions, that's exactly what my wife and I have done to make up to 30 years on retirement.

You do realise that you are both already untitled to a state pension, just not the full one? You will get 5/6 of the pension, your wife 1/2, BUT that is dependent on the UK gov not changing the rules again by the time you reach pension age. eg like they changed the number of contributions required from 39 30 for women after I'd already paid 39, a few of them voluntary.

It's a gamble. You might consider a few extra contributions for your wife rather than you, splitting the risk between you. Or you might just invest the cash in a saving account and leave it there - 21 years of interest and you know the money is yours to keep.

If you are working in Australia, you may not need to pay the voluntary contribution rate, you may be able to pay Class 2 contributions of £2.65 per week. See http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf, page 9.

Have done some looking into this since posting here yesterday, there was a good thread on this website about this exact issue.

As I understand it, I can pay the class 2 contributions rather than the class 3 contributions which is significantly less. I am going to call the helpline over in Newcastle to try and get a better and full understanding of exactly what is required and what the implicatiosn are, and I'll post an update online here to let everyone know.

Many thanks for the replies!!

Morning all,

An update to the above. I rang Newscastle, and they informed me I had to fill a form in and make a submission to see if I qualified to pay Class 2 contributions instead of Class 3. Had a reply in the post yesterday to confirm that this was the case. So it was definately worth querying, as they initially said I was liable for class 3 contributions (I will now be paying 130 a year isntead of 600 a year). So, figure I may as well pay the 5 years to take me up to 30 years contributions, but not worth it for my wife.

Thanks for all the comments!!

Thank you for the update. Should look at this for hubby and I too x

Did you find the form online or do I need to call Newcastle? I'm a little befuddled by their website I was able to find the right form to get my pension estimate though, so I guess that's something!

Although this is not specific to your situation, but with only 11 years worth of contributions ex pat can, claim a reduced OAP, 25% in my case, not a fortune I know, and it will be frozen from the time I turn 65, but better than nothing. I would get your name in the system before they change the rules which I am sure will happen in the future.

Might be better investing the 3k into a pension fund - in 21 years time I think you'll probably get more back than investing the additional contribution in the UK state pension - in 21 years time who knows if there will still be a pension on offer - and what the retirement age will be!

I don't consider it worthwhile contributing to NI UNLESS you plan on returning to the UK on your retirement.

WHY

1) UK pension is frozen when you access it.
2) Even if you don't contribute any more you will be entitled to a reduced state pension anyway.
3) Your UK pension is considered income and is taxed when you receive it in Oz.
4) Your UK pension is considered income and so your Oz State pension will be reduced because of this income.
5) UK gov can change the rules whenever they like.
6) I don't believe the payments of NI are tax deductible in OZ against your Oz income.

Just my opinion and my understanding of the rules.

yes they can and are talking about putting it up from 30 years to 35 years to qualify.

Although of course it did come down from 44 to 30 years only a couple of years ago.

And they are also increasing it from £107 to £144 per week.

At a cost of £2 something a week if you qualify for Class 2 contributions, it seems a very good bet to me.

By the time the OP reaches retirement age he will need 35 years of contributions to get full UK pension, changes made yesterday, and effective 20127.