I have never ceased to be amazed at the number of UK expatriates in Spain who have not thought about keeping their UK state pension up-to-date. Following on from this I then decided it would be helpful to create an awareness amongst the local UK residents regarding the fact that they could be eligible for a UK state pension. Having advised people on the Costa Del Sol how to update their pension and catch up with their contributions, I am now in a position to offer this service further afield to those expatriates who live in other countries by means of this web site.
A UK State Pension is available to any person, irrespective of nationality, who has been resident in the UK and has contributed to the UK National Insurance scheme. In order to obtain a full State Pension it is currently necessary to have contributed in respect of 30 years for both men and women. A single person's pension is currently a little under £6000 per year and a married couple’s pension is a little over £9000 per year.
In order to bring your State Pension up-to-date it is necessary to obtain a forecast and it is useful to have available your National Insurance number which is comprised of two letters followed by six numbers and one letter. Should this not be available then steps can be taken to obtain it.
The typical UK expatriate living abroad will have worked earlier in the UK and in all probability will already have built up a considerable number of years of contributions to the UK system. However upon leaving the UK contributions become voluntary and the vast majority of expatriates give no further thought to their UK pension until they realise that they are within sight of retirement age. The UK system currently allows you to catch up with contributions in respect of the last six tax years at a total cost of around £4500. With interest rates as they are at present it can be seen that this represents an extremely attractive investment and for a single person the return on the money spent is 25% and the equivalent figure for a married couple is 40%.
It is worth noting that it is possible to receive a pension from another country as well as a UK state pension. However should your pension record not reach the minimum number of years necessary to receive a payment upon retirement (for example 1 year in the case of the UK and 15 years for Spain) then the EU allows contributions from different countries to be grouped together in order to arrive at a pension which might not otherwise be payable.
The amount of a married couple's pension is arrived at by the wife receiving 60% of her husband's single person's pension. From April 2010 the husband has also been able to claim 60% of his wife's pension. This naturally only applies when your own contribution record produces a lower pension.
The 2007 Pension Act which was approved by Parliament and took effect on April 6th 2010 made a number of changes to the rules relating to pensions. These included linking the annual increases in the state pension to earnings rather than prices, setting up a new pension scheme funded by both employers and employees and, most important of all for UK expatriates, reducing the number of years to 30 for which contributions have had to be paid in order to receive a full state pension. This 30 year rule applied to everyone who reached retirement age on or after April 6th 2010. The Act also removed the minimum number of years that had to be paid in order to receive a state pension and from April 6th 2010 every year that had been paid up represents 1/30th of the state pension.
With people living longer it is not unreasonable to expect to live to 85 years of age. Even wealthy UK expatriates who may consider the state pension to be petty cash might change their mind when they consider the situation of the married couple retired for 20 years who will have received pension payments totalling £180,000 by the time they reach 85 years of age. In order to receive a payment of £9000 per year on retirement by way of annuity it is necessary to have built up a pension fund in excess of £150,000. The state pension contributions which can result in a similar payment are negligible when compared to this. While a retirement pension may not be a priority at a certain stage of your life, it can be very easily overlooked and if you are not careful, completely forgotten. The UK state pension may not represent a fortune but it can be obtained at very attractive contribution rates for those living and working abroad. Pensions may be dull and boring but they will never be as dull and boring as poverty can be in old age.