Have you topped up your NI/UK pension? Why? Why not?
 

Greetings and happy new year :) ... I hope everyone is well.

As usual, long time no post from me, and I'm back to ask a question of the community. This time, re. topping up NI contributions for my UK state pension while living in Oz.

I've done some research, not in detail, but it looks like the gov.uk site has suggested that a UK pension of about £150/week is forecast for me, but I can top that up in order to get to about £220/week. The figures don't really matter too much. More a case of "is it worth it?" I think I'd have to pay about £8,000 to catch up the last 12 years since leaving UK.

I assume that if I receive more in UK state pension, I'd receive less from the Aussie government? So, which is better, and is there any possible way of telling? I'm 53 - first joined this forum when I was 40, which feels like a VERY long time ago - so who knows at retirement age will bring, or even what age that will be. I've got $250,000 in super in the UK which will be transferred here in a couple of years, which I understand will impact my Aussie state pension too .. ?

As usual, any and all opinions gratefully received.

(And PS for those that might remember me - I'm still/now happily divorced, got my shizzle together, sons 13yo and 9yo are awesome and well settled in the shared care life. I used to drink WAY too much but counsellors & Drs happy I didn't have alcoholism; even so haven't had a drop or booze since the day the wife said "I'm off" and I posted a very depressed self-pitying missive on here. And as a result of sobriety my body and wallet are extremely grateful hahaha).

Cheers :)

Re: Have you topped up your NI/UK pension? Why? Why not?
 

I doubt that it would cost you that much to top up to a full UK pension - you can almost certainly do Class 2, which is much cheaper than the normal rate, for e it worked out about £170 for each year I had to make up. I'm no financial expert, but at the most basic level, its probably worth doing - the UK pension is not means-tested, you will get it regardless of assets, other income/pensions etc. The Aussie one IS means tested, and has more residency rules etc around it.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

I agree with Pollyana's advice above, with following additions:

You have to request to make Class 2 contributions, which requires filling in a form. I hear that can be done on line these days.

You only need to make a maximum of 35 years of actual or deemed years contributions - you will likely have 2-3 deemed years of contributions if you were at school between ages 16-18.

You can usually contribute for the current (tax) year and the preceding six years, and then year by year going forwards, but under a current concession, which IIRC ends at the end of this tax year, on April 5, 2025, you can currently make contributions in arrears as far back as tax year 2006-07. Time is short but I think you can still get your foot in the door before it slams closed.

I think the current Class 2 contribution rate has risen to about £190/yr.

Every £1 you contribute in Class 2 contributions will be returned to you in you first seven months after you start drawing your pension, so there is a very strong financial incentive to make Class 2 voluntary contributions if you are able to do so. The relevant "pay back period" is about 3½ years, IIRC.

One downside to being in Australia is that your pension won't increase after you start drawing it. And you can't finagle a permanent increase by claiming you have moved "permanently" back to the UK, then returning to Australia, as your pension will drop back to the original "frozen" level of payments.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

Thank you, both :)

Re: Have you topped up your NI/UK pension? Why? Why not?
 

Hello! I remember you, we had some chats in a few threads you posted at that time. It's so good to hear that you and your boys are doing so well, good on you!

Can't help with the pension thing sorry.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

I noticed an omission in my previous post.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

Well done you on “turning” your life around and it’s nice to know your sons are doing well, I would say it’s most definitely worth “topping up” your UK pension, being overseas you can pay less to top up (not sure why) than if you are in the uk, not sure (again lol) what you meant by “receive less from the Aussie government” I always thought you have to be in dire straits to gain a Pension from the Aussie government as most paid into a super scheme or do you mean with taxes when you are claiming an overseas pension?

Re: Have you topped up your NI/UK pension? Why? Why not?
 

If one qualifies for an Aus welfare pension then it is means tested. Any oncome received as a state pension from the UK is taken into account along with super and other assets so might lead to a reduction in the amount of Aus welfare pension to which one is entitled.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

I did not know that thank you , what circumstances/situations do you need to “be in” to gain an Aus welfare pension, would be helpful to know for a friend of mine. Ps I was in south wales last weekend visited our oldest son, we visited Carleon (Roman ruins) fab I love Roman history and also Penarth which was lovely (I miss seeing the sea lol)

Re: Have you topped up your NI/UK pension? Why? Why not?
 

This is the current info -

https://www.servicesaustralia.gov.au...?context=22526

Re: Have you topped up your NI/UK pension? Why? Why not?
 

This is the main reason for exploring if it is worth topping up my UK pension. The main benefit of the UK pension is it is basically guaranteed income, though dependent on the exchange rate on the date of payment of course. I've not found a definitive yes/no to the question 'is it worth it'. I do know that any top-up needs to be by 5th April, so I'd better get my skates on.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

I can’t see how it wouldn’t be worth it, see the calculations above. If you need to backpay 12 years (and can get Class 2 as expected), then that’s £2152.80. Which means if you get an extra £100 a week once you retire in return, it’ll only take approx 6 months for that to be recouped.

Hopefully, you’ll have a long and happy retirement claiming that extra money, so that investment should pay for itself many, many times over and give you an extra £5000 a year.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

Oh right, yes from that point of view it would absolutely be worth it! The penny hadn't properly dropped re. the difference between class 2 and class 3 contributions. So far I had only gone through the online estimator tool, which had told me I'd need to pay about £9,000 ... ouch ... I've now properly gone through the online application. Fingers crossed they'll tell me I qualify for class 2 payments!

The site says I can expect a reply by 30th April ... So more fingers crossed then, considering the deadline is 5th April, they are going by the application date and not the payment date.

Re: Have you topped up your NI/UK pension? Why? Why not?
 

You will still be able to top up after that. The deadline only means that you can't top up more that the most recent years (I believe its 6 years). So after the deadline date has passed you will still be able to top up each year until retirement, at the reduced Class 2 amount. I topped all mine up before I came back, but I think I'm a lot closer to retirement age than you. Reckon I topped up about 15-16 years for about £3,000 in total.
They are horribly backlogged because so many people are writing to them, but you will get an answer eventually. Even back in the days when I was sorting mine out it took about 3 months for a written answer. And once you do pay anything it probably won't show on your account for several months, although the money has been received. It used to worry me at first but then I realised they are just sllllooooowwwwww!

Re: Have you topped up your NI/UK pension? Why? Why not?
 

Even £9000 would mean you’d be quids in after less than 2 years so probably still worth doing if you can afford to.

As Polly said, it’s only back paying for missed years which has the deadline (more than 6 years currently), but then once you’re set up you can pay it going forward to get any more years needed.