As an expat in the United Kingdom, you may already know that you can be eligible for receiving a state pension if you reside and work in the country and you make contributions to National Insurance through your employer. Ideally, you can acquire your pension once you retire or reach the state pension age, which is currently 65 (although this is set to increase in 2020 to 66 years of age). But what else should you know about how the pension system works in the United Kingdom, and what are the most important facts and factors you should keep in mind? The following are the essential facts you should know about UK pensions as an expat in the UK, so you are well-informed.
Will you receive a full pension?
If you would like to receive the full pension, you need to have a contribution period of 35 years, meaning you would need to have made NI contributions for 35 years or more. But even if you have only made contributions for ten years, you can still receive the state pension, although it will not be in full. This is referred to as the pro-rata amount, which is calculated based on the total amount of contributions you’ve made for those 10 years, or more.
If you haven’t continuously resided or worked in the United Kingdom, you will be happy to know that your eligibility for the UK state pension doesn’t have to follow ten consecutive years. For example, if you are living and working in the UK for three years, move abroad for the next two years, and then go back to the UK and work for another seven years, you can still be eligible for the state pension. Bear in mind, though, that if you have gaps in your NI contributions for a few years, then you should purchase voluntary contributions (class 3), so you can fill in the gaps. Once you do this, you should be able to claim a higher amount from your UK state pension.
What more can you expect as an expat?
As an expat or foreign individual residing and working in the country, there are different terms when it comes to your entitlement for a UK pension as well. Fortunately, as an expat, you should be able to claim the pension once you reach your age of retirement, as long as you have contributed for more than ten years. But if you want more options when it comes to pensions for expats (and a more comfortable retirement), you can also opt for private pension schemes or workplace pension schemes if you aren’t part of your company’s automatic enrolment.
What about retirement outside the United Kingdom?
If you would like to retire outside the United Kingdom, some taxes or restrictions may apply. You may have to contend with taxes, for instance, and the rates for tax will depend on the agreements between the country where you are planning to retire or reside and the UK. In certain cases, you may have to pay tax for both countries, for example. In this kind of situation, though, you have some options: you can leave your pension in the United Kingdom and then withdraw your pension from another country, or you can move your pensions to another country; you can also do a combination of each option. It’s important that you seek help and advice as the tax implications can make a significant dent in your pension entitlement.
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