UK expats are set to lose out on ways to build up their state pension entitlement from April under reforms by the government – but many remain unaware of the changes, according to DeVere Group’s CEO.
The reforms, announced in the Autumn Budget last year, will remove access to Class 2 voluntary National Insurance (NI) contributions for individuals living overseas, which is historically the most affordable route for expats to maintain their NI contribution record and build up their state pension entitlement.
Class 3 contributions will become the primary option for expats to boost their state pension – but these carry a much higher annual cost. However, Nigel Green, CEO of advice group DeVere Group, warned that many expats seem to be unaware of the changes.
He said: “A significant number of British expats are at risk of being shut out of cost-effective ways to secure their state pension. Over time, switching from Class 2 to Class 3 [NI contributions] can add thousands of pounds to the cost of securing a full or partial state pension, fundamentally altering long-term retirement planning calculations.”
Alongside the cost increase, a new eligibility threshold will require people to have at least 10 years of UK contributions or residency in order to make any voluntary payments to top up their NI record.
Internationally mobile professionals, those who left the UK early in their careers, and long-term expats could therefore be locked out of being able to fill in gaps in their records, affecting their state pension down the line.
Green said: “Eligibility is tightening at the same time as costs are rising. Anyone who has worked in the UK needs to assess their position now, because the options available today will not necessarily exist after April.”
The UK state pension currently requires 35 qualifying years for a full entitlement, with a minimum of 10 years needed to receive any pension at all. Missing years reduces the final payments received.
