Redundancy Abroad & UK State PensionWritten on October 1, 2015 by Kirk Rice LLP
Financial Services QuestionsThe Question:
We have lived in various countries in Europe for more than 10 years and I am now redundant. I am not old enough to access UK pensions and will be working for another 10 years before retiring. I read about the new UK State Pension and it reminded me I have 30 years UK credit. What will my UK state pension be when I can receive it in 2026?
Kirk Rice LLP answers:
From next April each individual will need 35 years of sufficient National Insurance Contributions (NICs) to receive the new State Pension of about £151 a week (the current pension credit maximum). These contributions are generally known as Class1 if you are employed and Class 2 when self-employed. In order to obtain any part of the New State Pension an individual will need at least 10 years NICs. If you or your employer have been contributing to the Social Security system in the country of your residence these complete years will count towards this requirement, but the monetary benefit paid will reflect the number of actual UK contributions. So, if you had been paying into another European state system for 5 years and have 5 UK years too, you would be eligible for a UK pension and the amount will be 5/35 x £151 or about £21 per week. Subject to meeting the rules of each country’s scheme you would also receive the pensions from them. To answer your question you might expect £129 per week from the UK (30/35 x £151).
You must consider the pensions in each of the countries you worked to establish whether you have met their qualifying rules as well. Where you live in retirement will affect how any pensions are paid and whether they increase. UK pensions paid in the European Economic Area will increase in payment in line with whatever method the UK determines, which of course may mean it does not reflect your local price inflation. Currently the UK has what is known as a triple lock so that increases will be the highest of 2.5%pa, the Consumer price or Average Weekly Earnings inflation. The New State Pension will increase with Average Weekly earnings inflation.
You may consider paying Class 3 voluntary NICs in the UK if your overall contributions are not sufficient to provide a full pension. You’ll need to pay the full amount for each of the years you decide to buy. Whether you are eligible is a complex area and I recommend you contact the International Pensions Centre at https://www.gov.uk/international-pension-centre or call on +44 (0) 191 218 7777. Anyone with a quote for Class 3 years should consider financial advice before parting with their money as it may or may not represent good value for them.
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