UK State Pension
UK STATE PENSION FACTS FOR BRITISH EXPATS
Many British expats often overlook their UK State Pension, mistakenly believing that time spent abroad creates gaps in their contribution records and diminishes their pension value. However, this is not the case.
While the UK State Pension may not fully meet all retirement income needs for most expats, it remains one of the most economical foundations for retirement income.
If you have questions about your UK State Pension contributions, or how to top up and fill in missing gaps as an expat, read on and download our comprehensive guide for more information.
THE NEW (CURRENT) UK STATE PENSION
The UK government reformed the basic State Pension in 2016. For those who reach the State Pension age on or after that date, the new State Pension applies.
As of the 2024/2025 fiscal year, the new State Pension provides 203.85 GBP per week, marking a 10% increase from the previous year. Annually, this amounts to a total income of 10,600 GBP.
FROZEN PENSIONS
Over 500,000 Britons retired overseas are disadvantaged by the Frozen Pension policy.
In the UK, pensioners benefit from the Triple Lock rule, which increases State Pension payments by 2.5%, price inflation, or average wage growth, ensuring that pensions retain their value over time.
However, British nationals who retire in certain countries have their State Pension payments permanently frozen at the date they retire or arrive in their new country. This isn’t consistent; in some countries, UK State Pension payments are frozen, while in others, they aren’t. Notably, pensions are frozen in popular destinations like Canada, New Zealand, and Australia, affecting many British retirees.
BREXIT &THE STATE PENSION
While Britain was part of the European Union, UK nationals retiring in another EU country had their State Pension payments increased just as they would if residing in the UK. Brexit altered this arrangement.
Initially, the UK government announced that post-Brexit, state pensions for expats in the EU would increase annually only until 2023. After that, any further increases would depend on reciprocal agreements with EU member countries. However, in early 2020, the UK government assured British expats already residing in the EU that they would continue to receive annual pension increases.
This guarantee was welcomed by British retirees in the EU, Switzerland, and the EEA.
UK STATE PENSION QUALIFICATION
If you have accumulated at least 10 years of relevant UK National Insurance Contributions, you qualify for the State Pension. You can check your contribution history on this website. Ensuring you have sufficient qualifying years is crucial to maximising your pension.
BRITISH EXPATS CAN STILL RECEIVE THE UK STATE PENSION
British expatriates remain eligible to receive the UK State Pension even after relocating abroad. If you’ve already started receiving your State Pension and move overseas, your payments can still continue if they are deposited directly into your bank or building society account. However, it’s important to inform the pension service about your plans to leave the UK.
MAXIMISING YOUR STATE PENSION
To receive the maximum State Pension, it’s essential to have 35 years for a full contribution record. Expats can often top up their contributions to fill any gaps from years spent abroad.
TOPPING UP YOUR UK STATE PENSION OVERSEAS
To begin, assess your current State Pension entitlement by obtaining a pension statement, which you can easily request online or by post.
Once you’ve determined where you stand, consider applying to make voluntary contributions using the NI38 form. If you’re employed or self-employed, you can typically make Class 2 contributions, currently priced at £3.15 per week for the tax year.
For non-working individuals, Class 3 voluntary contributions are an option, albeit more expensive at £15.85 per week. Nonetheless, this remains a valuable investment, particularly for expats without current employment.
In general, most British expats should consider making voluntary National Insurance payments if they haven’t already accumulated 35 years’ worth of qualifying contributions.
GAPS IN CONTRIBUTIONS
Typically, you have the option to settle up to six years of outstanding payments.
STATE PENSION START DATE
The State Pension age was 65 for men born before December 6, 1953, and between 60 and 65 for women born between April 5, 1950, and December 6, 1953. However, there are changes ahead. In the future, the State Pension age will rise to:
- 66 for individuals retiring in 2020 or beyond
- 67 for those retiring in 2028 or beyond
- 68 for those retiring in 2046 or beyond
PAYING TAX ON YOUR PENSION FROM ABROAD
Taxation of your State Pension may be applicable both in the UK and the country of your residence abroad. However, you can often claim tax relief to avoid double taxation. If your country of residence has a double-tax treaty with the UK, you’ll typically only pay tax on your pension once, either to the UK or your country of residence, depending on the tax agreement in place.
CONTRACTING OUT
If you opted to contract out, your pension might be lower. Contracting out involves paying lower National Insurance Contributions, with the funds redirected into another pension scheme, such as a workplace or personal pension plan.
DEFERRING THE STATE PENSION
Delaying the State Pension can result in an increase of nearly 5.8% annually. However, you can’t receive the deferred amount as a lump sum, and there’s no inheritance for surviving spouses or civil partners of the additional pension built up from deferral. Assessing whether deferring is beneficial depends on your life expectancy.
Here are some additional factors to consider:
Future Changes: The State Pension represents a significant financial commitment for the UK government, raising the possibility of future alterations to the system. Potential changes may involve further increases to the retirement age, adjustments to the Triple Lock rule, or other unforeseen modifications
No Refunds: The Department for Work and Pensions (DWP) does not offer refunds for Voluntary contributions, so avoid overpaying unless necessary. This can be challenging if your plans are uncertain. If you’re currently living abroad and anticipate returning to the UK, consider delaying contributions until your plans are clearer. Typically, you can make payments for up to 6 years retrospectively, allowing you to fill in any gaps in your contribution record later if needed
Partial Pension Entitlement: Even with 35 years of contributions, you may not receive the full new state pension due to complex rules. For instance, participation in a contracted-out occupational pension scheme could result in lower National Insurance Contributions (NICs) and a reduced state pension entitlement. However, making additional contributions can help improve your pension entitlement over time
HOW WE CAN HELP
We offer expert advice and guidance on all aspects of the UK State Pension for expats. From understanding your entitlements to topping up contributions and managing your pension payments overseas, we are here to help.
For more detailed information get in touch with our team today.
