Inspired by willmore reminding me that I am now in the autumn (fall?) of my years, is anyone able to explain in terms simple enough for me to understand what happens about one's state pension when living abroad...? I understand that those living in Commonwealth countries are disadvantaged in that their pensions are not index-linked, but are they frozen at the levels at the point one leaves the UK, or from the point one starts to receive it?

In other words, if a full pension is now £4, and I have contributed enough to get £2, but by the time I get to 65 the full pension is £6, will I get £2 when I get to 65, or will I get £3?

It will be frozen at the time you start to receive it. So in your example above you would expect to get three pounds.

But remember:

a) laws change
b) exchange rates move


As ever, do not interpret this as financial advice - talk to a professional.


Mrs G

Probably a wise move to keep paying your brit pension even after you immigrate, it is one yearly payment. I think it depends on how much you will recieve at age 65. I am not sure if everyone recieves the same or not. They are still fighting to get this pension indexed in Canada but not sure how sucessful they will be. Then as Mrs.G said the exchange rate will factor into it as well. Ask me again in a few weeks...no not me! Mr. Corky will get his first payment!!!

Do you mean to keep paying the NIC to keep your pensionable years up to date? In my view that pointless - put it in an RSP instead at least that way you know there will be some sort of payout.

Its quite possible that by the time we reach 65 that there will be even more restrictive pensions.

Mrs G

As ever - do not take this as financial advice - speak to a professional.

Hi Rhodes

It really does depend on how old you are ....

To qualify for a full state pension you must have paid NICs for 44 years (man) or 39 years (woman - you need to check this as it depends how old you are - again!!). So if, like me, you have worked for 20+ years paying a full stamp, the advice is to do the sums carefully.

Not sure how old you are but for example if you are 50 (sorry!!) and will pick up your state pension when you are 65 then consider:

The full basic state pension is currently about £4140 per year. If inflation runs @ 3% a year - in 15 years time the pension received would be approx £6450 per year.

Assuming the weekly payment for a voluntary Class 3 NI contribution remains constant at £7.15 per week (current figs) - very doubtful - you will have paid a further £5580 approx into your "pension pot". By making the additional contributions you would then qualify for the full basic pension of - say - £6450 - which will then, under the current rules, be frozen

If you don't pay the extra NIC's (and you must pay the full 52 weeks in each tax year for it to count) then there will be a large shortfall in your pension (and I can't do the calculations for that!!), which should be considered against the 20+ years of contributions that you have already made.

However as I said at the beginning it really does depend on how old you are. Those youngsters on the Forum who perhaps only worked for 10 years in the UK will have different views I guess.

Hope that helps but as Mrs G said - speak to an expert - I am only giving a personal opinion based on things that apply to me - although I'm not quite 50!!

Jen

Thanks to you all. It'd not so bad if it is frozen only from the time I begin to collect it. I'm not going to worry to much about it just yet.

Oh, and I'm 40, by the way.

My understanding is that your UK state pension is frozen from the time you become domiciled in another country that is not an EEA member. Those who left the UK when they were younger receive a pension payable at the
rate in force when they claim their state retirement pension, but this is often far short of the full entitlement as others have said, as it is based on the contributions made only while you were domiciled in the UK. Canada only has a reciprocal agreement for taxation.I am trying to find a link that says this, as this advice is what I was given when I left the UK but it is only on a letter from the Pensions Branch. Will post it when I do.

Been nipping into the BC bud again? .......and......having another flashback??

Some non-EEA countries are also ok for indexation, eg I believe the US.

Some points I would make:

1. The UK basic state pension is not a fortune even if it is indexed, so one shouldn't be planning to rely on it.
2. Anyone planning to make voluntary UK NIC contributions should do the sums carefully vs increased contributions in country of residence, or an alternative saving scheme.
3. UK private and company pensions are *not* affected by this 'no-indexation' rule.

Jeremy