Ever worked in the UK? Here’s your step-by-step to buying yourself a UK state pension alongside your Irish one – and on the cheap
Our Managing Director, Colm Moore CFPⓇ, recently provided a step-by-step guide to increasing your UK state pension entitlement in the Irish Independent. Check it out below and learn how you can claim this valuable benefit.
Hundreds of thousands of people crossed the Irish Sea in the 1980s and after the 2008 financial crash in search of a new life, building roads and cities, teaching in schools, nursing in hospitals, or working in finance. Many of them returned to Ireland in the belief they had left their UK state pension behind them.
Now, these returned immigrants have a chance of a lifetime to benefit from their time in Britain, with the UK government effectively subsiding them to top up their UK pension.
Thanks to a temporary concession, Irish people who worked for at least three consecutive years in Britain and paid national insurance (the equivalent of our PRSI) can buy back as many as 18 extra years to their UK pension, instead of the usual six. And by continuing to make voluntary national insurance contributions in the years ahead, some of those former emigrants could claim both a full Irish and full UK state pension in retirement.
“The UK government is not exactly writing to everyone in Ireland to say ‘you are entitled to this’,” says Colm Moore, Managing Director of Moore Wealth Management. “But there’s no better financial advice than to buy back these pension years. It’s an A-rated guaranteed income from UK government.”
How do I qualify?
You must have 10 qualifying years on your national insurance record to receive the minimum UK state pension. If you want the full pension, which currently stands at £210 per week, you’ll need 35 years on your record.
However, even if you haven’t worked the required amount of time to reach the minimum 10 years, you can make voluntary contributions to increase your record, as long as you already have three years contributions. Having ten years on your record would entitle you to 10/35ths of the full pension, or £52.90 per week. A recent update indicates that those with only one year who left employment in the UK and immediately took up employment in another EU country can also apply.
You have until the 5th April 2025 to pay voluntary contributions to make up for gaps between 2006 and 2024. But after this deadline, you will only be able to pay contributions to cover the previous six years. Buying 16 years’ worth of contributions would bring you closer to the 35 years required for the full state pension. And if you have enough years left until you retire to continue making voluntary contributions, you could reach the 35-year threshold and claim the full UK state pension. Combined with the full state Irish pension of €277.30 per week, you could be commanding a strong guaranteed income for life (excluding double payments) – in state pensions alone.
“If you were a 66-year-old at the moment living in the UK and were trying to buy an annuity for life that would give you the equivalent of the UK pension, it would cost you at least £250,000 to buy that benefit,” Moore says. “But you’d be buying it for a fraction of the cost.”
Why the urgency?
The Deadline for this is the 5th of April 2025
How much will it cost?
The cost of topping up your UK pension depends on whether you have to pay class 2 (non-resident) or class 3 (resident) contributions, with HM Revenue & Customs (HMRC) determining which category you are in.
The cheapest option for buying national insurance contributions is class 2, which costs about £179 for each pension year. If you are categorised as class 3, you will have to pay £907 to buy each pension year.
But even if you buy years at the more expensive rate, you would have made your money back if you lived for 3.5 years after you retired, compared to less than six months by buying at class 2 rates,
How to apply
The application process takes time and there’s a backlog, so get the ball rolling now. Most of the process is conducted online and if you’re in any way tech-savvy and are comfortable filling out forms, you could find the process relatively straightforward. If not, some financial advisers will do it for you.
Steps
- Get your Gateway ID https://www.gov.uk/check-national-insurance-record
- Apply for a State Pension Forecast https://www.gov.uk/check-state-pension
- If the forecast tells you that you are eligible refer to this guide
https://www.gov.uk/government/publications/social-security-abroad-ni38/guidance-on-social-security-abroad-ni38 - Make your Payment via the online portal.
The changes
The UK introduced changes to its state pension in April 2016, when it introduced the so-called New State Pension, which is worth more but also requires more years of contributions.
To qualify for the full new pension, which applies to a man born on or after April 6, 1951 or a woman born on or after April 6,1953, people generally require a 35-year record of paying national insurance contributions – up from 30 years under the previous regime.
Under normal rules, it’s only possible to plug gaps in your national insurance record up to six years after the year in question. But under transitional arrangements, which were due to end on April 5, 2023, but were extended until April 2025 due to an influx of inquiries, people who come under the new state pension system are able to plug any missing years from the 2006/2007 tax year onwards. This means people can currently pay for up to 18 years missing from their record.
Financial planner Colm Moore says: “Because the UK changed the qualifying period from 30 years to 35 years in 2016, you had people who were approaching retirement age and then found that the goalposts had changed. So, they brought in an option for people to buy back 10 years from 2006 to 2016.”
Despite Brexit, both Irish and UK citizens living in Ireland can still benefit from social insurance contributions they made when working in the UK
Colm Moore Grad Dip, SIA, QFA, CFP®, and his business Moore Wealth Management have been advising the pharmacy community for over 20 years. He can be contacted at 086 860 3953 or via colm@mwm.ie.
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