Individuals who have worked in the UK for as little as three years can qualify for a state pension
Expats are being urged to make the most of a “wild loophole” offering former UK taxpayers the opportunity to significantly boost their retirement income.
Individuals who have worked in the UK for as little as three years can qualify for a state pension by filling gaps in their national insurance (NI) contributions – a scheme set to end next Saturday (5 April).
People around the world could be eligible for the top-up, even if they have never had UK citizenship, but they will have to be quick.
There has been a flurry of social media posts and news stories that has alerted people to the chance to get a UK state pension.
The Australian Financial Review said the opportunity was a “$480,000 (£233,000) opportunity for Australians who did a stint in London”.
Similarly, theaussiecorporate, an Instagram account, described it as a “wild loophole for expats”. The Irish Times said that “hundreds of thousands of Irish people” were eligible.
How does this work?
The full state pension for those who retired after 5 April 2016 (when the state pension system was reformed) is £221.20 per week, or around £11,500 per year.
To qualify for the full amount, you need to have a National Insurance (NI) contribution record of 35 years, with deductions made for every missing year on your record. You need at least a ten-year NI record to qualify for any state pension entitlement.
For anyone who thinks they might come up short of NI contributions, there is the option to pay voluntary NI in order to boost your entitlement.
Even if you have reached state pension age (which is currently 66), you can top up your state pension by paying voluntary NI.
It costs £17.45 to buy a week’s worth of state pension entitlement in 2024/25, or around £900 to buy a year’s worth of state pension.
This arrangement will end on 5 April this year.
Expats and foreigners who worked in the UK for three or more years can also take advantage of this and could claim a state pension of up to £12,000 per year.
Anyone who worked in the UK for at least three years and can top up their NI contributions – which can cost up to £907 per year – can qualify for the state pension. More NI contributions equate to a higher payout.
Those who qualify for class 2 contributions – which require you to have worked in the UK immediately before leaving and to have worked abroad – the voluntary contributions can be as low as £179.40 per year.
Therefore, if someone had worked in the UK and had nine qualifying years of NI contributions, a single payment of less than £200 would entitle them to about £3,500 a year for life in state pension.
The deadline has already been extended twice
The current arrangement was originally set to end in 2023 but was extended twice after surges in interest near the deadline.
Sir Steve Webb, former pensions minister and partner at LCP, told the Financial Times: “The intention [behind the voluntary contribution scheme] is that you have people who work in the UK, move abroad and come back – you want them to be able to fill in gaps in their record.
“What’s odd is this business of going back so long.”
‘The opportunity is extremely valuable but some may exploit it’
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the opportunity is “extremely valuable”.
Speaking to The i Paper, she said: “It can also be a vital source of income for people who may have worked in the UK for extensive periods but choose to retire in another country.
“This unique opportunity to backdate payments all the way to 2006 means expats or those who have already returned home from a stint overseas don’t need to stress about securing a full state pension.
“Of course, they still need to find the funds to plug those gaps, but expats who worked during their time overseas may qualify for the cheaper class 2 rate.”
Ms Haine did point out that some people, who have only worked in the UK for a very short stint and may not even return to live in the country, may exploit this opportunity.
She added: “People typically need at least 10 years of NI contributions to receive any state pension at all.
“The current opportunity to backdate payments over a longer term than the typical six years – a move designed to help those affected by new state pension transitional arrangements – is predominantly in place to ensure future retirees in the UK have adequate income at the most vulnerable stage of their life.
“It will cause anger if some people are taking advantage of a loophole for their own gain from another part of the world, especially when the UK’s public finances are in such a poor state and the long-term sustainability of the UK state pension system is under pressure.”
