Paying UK State Pension contributions - now living in Ireland

[Germaine]

My husband and I worked in the UK for 10 years during which time we paid 10 qualifying years of National Insurance Contributions - HM Revenue & Customs - and built up a state pension.

We moved to Ireland and continued to pay voluntary class 2 contributions for a couple of years as the intention was to return to the UK within a short time.

While we still might return to live and work in the UK (He is British, I'm Irish) that might not be for a number of years. Should we continue to pay the annual voluntary contribution shortfalls?
Can anyone recommend who we could speak to regarding advice on this.

Thank you.

 

[cremeegg]

I tried to get advice on this some years ago, but could not find anyone who was knowledgeable. There is no money in advising on state pensions. Pension advisers only do private pensions.

I made many phone calls to the UK pensions people in Newcastle. Some very knowledgeable some less so. Of course they are not allowed to give advice.

My tuppence worth is that it is a very good idea to keep contributing. The longer you live after pension age the better it is.

 

[Marc]

Hi,

I’ve just done this excercise for myself based on my own National Insurance record.

I’ve calculated that I need to pay £5000 to buy back my missing contributions but that this is worthwhile.

I’ll include a detailed guide which sets out my findings.

You also sound as though you should consider a non-domiciled investment strategy.

https://calendly.com/marc-westlake

 

[Marc]

1. Have you worked in the UK?
If you’re looking to maximise your income in retirement, a good place to start is with your State Pension. If you’re not getting the full amount or are not on track for it, then it’s worth considering topping up. The cost of doing this is effectively subsidised by the Government which means it can be very good value for money.
The amount of State Pension you get is based on your record of National Insurance contributions (NICs). If you haven’t made enough contributions then you won’t get a full State Pension. But you may be able to pay voluntary contributions to boost the amount you get, even if you’ve already retired. The rules about who can top up, how much it costs and what impact it will have on your State Pension are complex and have changed recently with the introduction of the new State Pension system in April 2016.
Our aim is to help you to navigate these various rules and regulations and make a more informed choice about whether or not to top up your pension.

2. WHICH STATE PENSION SYSTEM DO YOU COME UNDER?
The rules about whether you can top up your State Pension and how much it costs depend on whether you come under the old system or the new system.

Old system

The old system applies to people who reached State Pension age before 6 April 2016 (even if they have deferred taking their State Pension).

So that is:
• men born before 6 April 1951 and
• women born before 6 April 1953.


New System
The new system was introduced on 6 April 2016 for those who reach their State Pension age on or after that date.

So that is:
• men born on or after 6 April 1951 and
• women born on or after 6 April 1953.

3. How to work out if you have gaps in your National Insurance record which can be filled
If you have gaps in your National Insurance (NI) record you may be able to make up the gaps, and so increase your State Pension, by paying voluntary National Insurance contributions (NICs). However, you can’t fill a gap if, in the year in question, you were:
• over State Pension age at any point or
• eligible to pay the special reduced ‘married woman’s rate’ of National Insurance for that year, or
• exempt from paying NI as a self-employed person because you held a low earnings exception certificate. However, you may be able to pay voluntary Class 2 NICs – the special category of NI for the self-employed – and the cost of this is just £2.95 per week at 2018/19 rates.

Provided that you don’t fit in any of the above categories and that the deadline has not passed, you can buy back as many ‘missing’ years as you wish.
Things to bear in mind
1. If you’re divorced or have been bereaved your State Pension entitlement may be based partly or wholly on the NICs of your ex- or late spouse. But the basic principle is the same – if the NI record used to calculate your pension has gaps in it, you can fill those gaps by paying voluntary contributions.
2. Just because you can fill gaps in your record, it doesn’t necessarily mean you should. Check your ‘Personal Maximum’ figure on the ‘Check your State Pension’ website. This is the most you can get in State Pension if all the gaps in your record were filled and all the years from 2016/17 counted towards your State Pension. If your Personal Maximum is greater than or equal to the full flat rate of £164.35, it may be that you’ll get a full State Pension without needing to pay any voluntary contributions. This is especially likely to be the case if your starting amount is already close to the full flat rate and/or if you have a number of years to go between 2016/17 and when you reach State Pension age

4. How to top up your basic State Pension – Old system
The full basic State Pension under the old system is currently £125.95 a week. To get this you need 30 qualifying years of National Insurance contributions (NICs ). If you have less than 30 qualifying years, you may be able to pay voluntary contributions (Class 3 contributions) to buy extra years (though time limits apply).
If you paid some NICs in a given year but not enough to achieve a full qualifying year, paying voluntary contributions to top up that year is likely to be the cheapest way to achieve an additional qualifying year. You can ask the Pension Service (0800 731 7898) if you have any partially complete years of this sort.

5. Which years can I pay Class 3 contributions for and what are the deadlines?
You normally can only go back up to six years. So, the earliest missed NICs you can now make are for 2012/13 and you have to do this by 5 April 2019.
However, different deadlines apply to the group who reached State Pension age between 6 April 2010 and 5 April 2015 and who already have at least 20 qualifying years.
This covers:
– men born 6 April 1945 to 5 April 1950 inclusive and
– women born 6 April 1950 to 5 October 1952 inclusive. This group can buy back up to six missing years right back to 1975/76 and the deadline is six years after the date on which they reach State Pension age. Not everyone can pay voluntary Class 3 NICs for a given year.
The main exceptions are:
• married women who paid or could have paid the married woman’s stamp for the year in question
• certain low-income, self-employed people who paid no NICs in the year in question because they had a certificate of exception because of low profits; however, they can pay voluntary Class 2 NICs (the special category of NI for the self-employed) and the cost of this is just £2.95 per week at 2018/19 rates.

6. How much do voluntary Class 3 NICs cost?
If you have less than 30 qualifying years of NICs you will get a reduced basic State Pension. For example, if you have 29 years of NICs you’ll get 29/30 of the full pension, if you have 28 years you get 28/30 of the full pension and so on.

The amount you have to pay for an extra qualifying year depends on how much you have already paid for that year. If you made no NICs for that year then you will have to buy enough Class 3 contributions to cover the whole year. If you have already made some contributions for that year, you only have to top up for the missing contributions. For example, if you have paid 38 weeks’ worth of NICs you only need to buy another 14 weeks’ worth of NICS to make that up to a qualifying year.

The cost of voluntary Class 3 NICs is currently £14.65 per week. If you are paying in respect of a financial year more than two years ago, this is the rate you would pay. However, if you are paying for a relatively recent year (specifically 2016/17 or 2017/18) you would pay the rate that applied in those years. These are £14.10 for 2016/17 and £14.25 for 2017/18.

This means it costs up to £762 to buy an extra qualifying year of NICs. This would boost your State Pension by 1/30 of the full rate so you’d get an extra £4.20 of State Pension every week or £218.31 a year.

Given that it costs a one-off lump sum of no more than £762 to buy extra pension of £218.31 a year, it would take less than four years of receiving higher State Pension to recoup this cost and you would continue to receive this extra pension for the rest of your life. Provided that you can afford to do so, you can in principle buy back more than one missing year, and each additional year will boost your State Pension by the same amount.

7. How do I pay Class 3 NICs?
There are a variety of ways including sending a cheque through the post, paying at your bank or building society, paying online or over the phone or monthly via Direct Debit. You can find more details at https:// [broken link removed] If you are already receiving your State Pension it will be increased as soon as your voluntary NICs are received, though the increase will not be backdated.

8. How to work out if your pension will reach £164.35 through post 2016 qualifying years
Under the new State Pension system, everyone has a starting amount as at 6 April 2016. This represents the amount of State Pension you have built to date.

If your starting amount is below £164.35, each qualifying year from 2016/17 up to the financial year before the one in which you reach State Pension age will increase your State Pension until you reach the full rate. The amount added for each year is 1/35 of the full flat rate. At current rates this is £164.35 divided by 35 or an extra £4.70 per week.

To work out if you are likely to reach the full flat rate of £164.35 without paying voluntary contributions, you need to go through the following steps:

a) check your starting amount as at April 2016
b) add £4.70 per week for each year that you expect to work or be credited with contributions from 2016/17 onwards
c) if the total amount exceeds £164.35 then there is no point paying voluntary

National Insurance contributions to bring you up to a full new State Pension, because you will reach that figure in any case.
The ‘Check your State Pension’ website contains some information that is relevant and may be helpful. It gives you two numbers – your starting amount and your ‘Personal Maximum’. Your ‘Personal Maximum’ is the most you can get in State Pension if all the gaps in your record were filled and all the years from 2016/17 counted towards your State Pension.

However, what the Government does not know is whether you plan to be working or contributing in each of those years. So, for example, if you already know that you plan to retire before State Pension age you need to do the calculation in this Note to work out if your State Pension is going to be short of the full flat rate.

If you expect your pension to reach £164.35 without paying voluntary contributions, but your plans change and you reach State Pension age with a pension short of the full amount, you can still pay voluntary contributions for recent ‘gap’ years provided you are within the time limits. In such a case, there is no point paying voluntary contributions now. You can wait and see what happens and pay them later if you are heading for a shortfall.

9. How to top up old pension for years up to 2015/2016
If you come under the new State Pension system you will have a starting amount calculated as at April 2016. Because of the special rules governing the transition from the old system to the new system, your 2016 starting amount may be based on the State Pension entitlement you had built up at that point under the old State Pension system. This means you may be able to top up the basic State Pension element of this starting amount if it is based on an incomplete record of National Insurance contributions (NICs).

The full basic State Pension under the old system is £125.95 a week. To get this you need 30 qualifying years of NICs . If you have less than 30 qualifying years, you may be able to pay voluntary contributions (Class 3 contributions) to get extra years (though time limits apply).

If you paid some NICs in a given year but not enough to achieve a full qualifying year, paying voluntary contributions to top up that year is likely to be the cheapest way to achieve an additional qualifying year.

Which years can I pay Class 3 contributions for?

If you are covered by the new State Pension system you can top up your National Insurance record for years from 2006/07 onwards. You need to do this by 5 April 2023. After this date, missing years have to be topped up within six years.

Not everyone can pay voluntary Class 3 NICs for a given year. The main exceptions are:
• married women who paid or could have paid the married woman’s stamp for the year in question • certain low-income, self-employed people who paid no NICs in the year in question because they had a certificate of exception because of low profits; however, they can pay voluntary Class 2 NICs (the special category of National Insurance for the self-employed) and the cost of this is just £2.95 per week at 2018/19 rates.

 

[Johnjb]

I contacted the guy mentioned here Frank Buckley, and he is looking into my position, cant post the link but try google independent.ie uk pensions

 

[Carnmore]

Thank you for this comprehensive post.

8. How to work out if your pension will reach £164.35 through post 2016 qualifying years


To work out if you are likely to reach the full flat rate of £164.35 without paying voluntary contributions, you need to go through the following steps:

a) check your starting amount as at April 2016
b) add £4.70 per week for each year that you expect to work or be credited with contributions from 2016/17 onwards
c) if the total amount exceeds £164.35 then there is no point paying voluntary


The ‘Check your State Pension’ website contains some information that is relevant and may be helpful. It gives you two numbers – your starting amount and your ‘Personal Maximum’. Your ‘Personal Maximum’ is the most you can get in State Pension if all the gaps in your record were filled and all the years from 2016/17 counted towards your State Pension.

By 'Check your state pension website' do you mean registering with the gov.uk site?
My record just gives me an 'Estimate based on your National Insurance record up to 5 April 2018' and 'Forecast' if I contribute up to the year before my retirement date; No mention of 'starting amount' from 2016/17 or 'personal maximum' - what do these mean?

If your Personal Maximum is greater than or equal to the full flat rate of £164.35, it may be that you’ll get a full State Pension without needing to pay any voluntary contributions. This is especially likely to be the case if your starting amount is already close to the full flat rate and/or if you have a number of years to go between 2016/17 and when you reach State Pension age

Is this on the basis of returning to the UK before retirement age and paying compulsory NI contributions?

If you have gaps in your National Insurance (NI) record you may be able to make up the gaps, and so increase your State Pension, by paying voluntary National Insurance contributions (NICs). However, you can’t fill a gap if, in the year in question, you were:
• over State Pension age at any point or
• eligible to pay the special reduced ‘married woman’s rate’ of National Insurance for that year, or
• exempt from paying NI as a self-employed person because you held a low earnings exception certificate. However, you may be able to pay voluntary Class 2 NICs – the special category of NI for the self-employed – and the cost of this is just £2.95 per week at 2018/19 rates.

Class 2 contributions only became cheaper then Class 3 in 2003 and based upon the 6 year maximum buyback period, I bought the cheaper Class 2 for a self-employed person in the ROI.

What is quite confusing is that HMRC require proof of self-employment in the ROI to be eligible to make voluntary UK Class 2 contributions.

This obviously means that the self-employed person is compulsorily insured (paying PRSI) in another EU member state (ROI).

However, the Department of Social Protection in Ireland have stated it is illegal to be paying social insurance in two member states simultaneously.

Do you have any insight in to this?

 

[Carnmore]

Any thoughts on this Marc?

 

[Ann1]

Just thought I'd mention that the Class 2 NI contribution will be abolished in April 2019. It will be replaced by a new Class 4 contribution for
self employed contributors. I have not seen any mention of a replacement of the Class 2 contribution for those living abroad in any of the articles I have read.

 

[Feemar5]

My husband worked for a short period in the UK many years ago and about 15 years ago he started paying voluntary contributions and he qualified for a reduced pension when he reached pension age. All I can say it was a far better investment than what we paid into private pension schemes here - the only downside was that we didn't get tax relief on the contributions.

 

[jpd]

and it might disappear post-Brexit - who knows?

 

[Carnmore]

Just thought I'd mention that the Class 2 NI contribution will be abolished in April 2019. It will be replaced by a new Class 4 contribution for
self employed contributors. I have not seen any mention of a replacement of the Class 2 contribution for those living abroad in any of the articles I have read.

Abolition of Class 2 has already been delayed for a year and there may still be some sort of deal for the self-employed and/or expats

 

[Lisboa]

I’ve just done this excercise for myself based on my own National Insurance record.

I’ve calculated that I need to pay £5000 to buy back my missing contributions but that this is worthwhile.

Do you mind if I ask for a breakdown of that; it seems quite high so I assume that your contributions are about 6 years worth at Class 3 rates?

Just thought I'd mention that the Class 2 NI contribution will be abolished in April 2019.

No not anymore; that proposal has been scraped entirely.

My husband worked for a short period in the UK many years ago and about 15 years ago he started paying voluntary contributions and he qualified for a reduced pension when he reached pension age. All I can say it was a far better investment than what we paid into private pension schemes here - the only downside was that we didn't get tax relief on the contributions.

Apologies if I am misunderstanding, are you saying that it's possible to claim back tax relief on paid voluntary contributions, but that you didn't/forget to claim for it? From the HMRC or Ireland's Revenue? 20%?

and it might disappear post-Brexit - who knows?

What might disappear? Voluntary contributions for non-British residents?

 

[jpd]

What might disappear? Voluntary contributions for non-British residents?

Who knows? anything could happen now

 

[Lisboa]

Who knows? anything could happen now

Voluntary contributions can be paid from any country in the world (upon meeting eligibility of course) so Brexit won't impact this as it's irrelevant if UK is EU or not.

Something that may be affected post brexit though, is that Ireland may start accepting voluntary contributions from (eligible) people that are also paying UK contributions, as it would no longer be breaking their current "You can choose to pay voluntary contributions if you:
Are no longer covered by PRSI on a compulsory or voluntary basis in another EU country" rule.

 

[Lisboa]

There seems to be a certain amount of ambiguity on the internet about working in Ireland (thus paying compulsory PRSI contributions) and simultaneously paying UK voluntary NI contributions. I can't seem to locate a crystal clear answer on this.

We all know that HMRC accept our voluntary NI contributions if we're living and working and paying PRSI here in Ireland.

And bear in mind Ireland do not accept voluntary contributions if one is paying PRSI/NI in the UK or another EU state.

But I have a worry in the back of my mind that when the time comes for Ireland to pay out our dual-pensions, they're going to disregard any years in which we paid both compulsory PRSI and voluntary NI in the same year.

This little paragraph on welfare.ie has me slightly worried -

Overlapping periods (e.g. where paid contributions in the other country coincide with pre-entry credits in the Irish record, or Irish contributions for a posted worker are reckonable as periods of residence in the other country) are only counted once.

http://www.welfare.ie/en/Pages/Bilateral-Agreements---Guidelines-on-Application-of-Bilatera.aspx

On the surface that seems it only applies for pre-entry credits, but I still have some concerns about Ireland causing hassle over people paying into 2 social security schemes simultaneously.

I've also read elsewhere that someone received in writing that -

'where a decision is being made in relation to a pension entitlement, and overlapping contributions are examined to see which is the competent institution under the EU regulations at the time the contributions were made, i.e. which country would have been considered responsible for the person's social insurance liability at the time the contributions were paid.'

Case study -

-Joe was born in 2000 in England.
-Started working in 2020.
-He moved to Ireland in 2040, so with a record of 20 UK NI contributions.
-He worked in Ireland from 2040 until retirement age, likely at least 70 years old by that time, say 2070, and retiring with 30 PRSI contributions.
-Meanwhile, he paid UK voluntary contributions from the first day he moved to Ireland, until he accumulated the 35 years needed for a full UK state pension, so he topped up by 15 years from 2040 until 2055. (Remember he already had 20 years when he moved here). Which he is legally entitled to do.
-At retirement age, his portfolio is 35 UK contributions (enough for a full UK pension on it's own), and 30 Irish PRSI (enough for 30 out of 40 under the new Irish system that will begin soon).
-He believes he is entitled to a full UK state pension, plus entitled to a partial Irish pension of 30/40th's.
-He still lives in Ireland so applies for both pensions through the Pension department here.

Going back to that quote -

Overlapping periods are only counted once.

Now; do Ireland pay what he believes he is entitled to?

Or do they disregard all 'overlapping years' of contributions, which would result in him losing his 15 UK voluntary contributions, and thus Ireland pension department only working with 20/35th's UK contributions and 30/40th's Irish, giving a pro-rata amount, but no longer a full UK pension.

Sorry this was long winded. I'm not even that confident that a professional pension expert could give a clear answer.


So I'm going to see if the proof lies in the pudding here - is there actually anybody on this forum, or do any of you know a person who is currently claiming both the Ireland and the UK state pensions (whether it's both full pensions, both partial pensions, or a combination), due to Ireland taking into account overlapping years of voluntary NI contributions and compulsory Irish PRSI?

 

[Ann Leo]

Wonder if you ever got an answer to this ..I am currently on process of buying12 years voluntary contribution d

 

[Lisboa]

Wonder if you ever got an answer to this ..I am currently on process of buying12 years voluntary contribution d

Didn't get a definitive answer, but it seems there's plenty of people out there claiming both Irish and UK state pensions, so I felt more at ease about back-paying my 12 or 13 years of UK voluntary contributions.

Perhaps it just meant that a single contribution can't be used for 'double-dipping', and will only be counted once, so to prevent a single contribution overlapping into two PRSI state systems.

 

[MeathCommute]

I contacted the guy mentioned here Frank Buckley, and he is looking into my position, cant post the link but try google independent.ie uk pensions

Just picking up on this old message. I dealt with Frank Buckley as well. Found the service worthwhile, however he told me to send a payment to the Pension crowd in Newcastle with a cover letter, but neglected to say that I needed to fill in the CF83 form as well. I rang Newcastle a few weeks after sending the payment. They had received it, but didn't know where to appropriate it. Turns out that the form is important to fill.

 

[Carnmore]

There seems to be a certain amount of ambiguity on the internet about working in Ireland (thus paying compulsory PRSI contributions) and simultaneously paying UK voluntary NI contributions. I can't seem to locate a crystal clear answer on this.

We all know that HMRC accept our voluntary NI contributions if we're living and working and paying PRSI here in Ireland.

And bear in mind Ireland do not accept voluntary contributions if one is paying PRSI/NI in the UK or another EU state.

But I have a worry in the back of my mind that when the time comes for Ireland to pay out our dual-pensions, they're going to disregard any years in which we paid both compulsory PRSI and voluntary NI in the same year.

This little paragraph on welfare.ie has me slightly worried -



http://www.welfare.ie/en/Pages/Bilateral-Agreements---Guidelines-on-Application-of-Bilatera.aspx

On the surface that seems it only applies for pre-entry credits, but I still have some concerns about Ireland causing hassle over people paying into 2 social security schemes simultaneously.

I've also read elsewhere that someone received in writing that -

Case study -

-Joe was born in 2000 in England.
-Started working in 2020.
-He moved to Ireland in 2040, so with a record of 20 UK NI contributions.
-He worked in Ireland from 2040 until retirement age, likely at least 70 years old by that time, say 2070, and retiring with 30 PRSI contributions.
-Meanwhile, he paid UK voluntary contributions from the first day he moved to Ireland, until he accumulated the 35 years needed for a full UK state pension, so he topped up by 15 years from 2040 until 2055. (Remember he already had 20 years when he moved here). Which he is legally entitled to do.
-At retirement age, his portfolio is 35 UK contributions (enough for a full UK pension on it's own), and 30 Irish PRSI (enough for 30 out of 40 under the new Irish system that will begin soon).
-He believes he is entitled to a full UK state pension, plus entitled to a partial Irish pension of 30/40th's.
-He still lives in Ireland so applies for both pensions through the Pension department here.

Going back to that quote -

Now; do Ireland pay what he believes he is entitled to?

Or do they disregard all 'overlapping years' of contributions, which would result in him losing his 15 UK voluntary contributions, and thus Ireland pension department only working with 20/35th's UK contributions and 30/40th's Irish, giving a pro-rata amount, but no longer a full UK pension.

Sorry this was long winded. I'm not even that confident that a professional pension expert could give a clear answer.


So I'm going to see if the proof lies in the pudding here - is there actually anybody on this forum, or do any of you know a person who is currently claiming both the Ireland and the UK state pensions (whether it's both full pensions, both partial pensions, or a combination), due to Ireland taking into account overlapping years of voluntary NI contributions and compulsory Irish PRSI?

Hi Lisboa, Did you get any update on this?

 

[Lisboa]

Hi Carnmore,

Didn't get a definitive answer, but it seems there's plenty of people out there claiming both Irish and UK state pensions, so I felt more at ease about back-paying my 12 or 13 years of UK voluntary contributions - which I did a few weeks ago before yesterday's deadline to pay at the lower rates.

I read some of the documents on the subject on the europa.eu website, quite a bit of jargon but I believe that the 'overlapping' just means that a single contribution can't be used for 'double-dipping'; will only be counted once, so to prevent a single contribution overlapping into two PRSI state systems.

Paying voluntary contributions into one EU state whilst compulsorily paying in a different EU state appear to be accepted and legal under EU law - for example it seems UK, Germany, France all accept voluntary contributions in this scenario, even though Ireland don't.