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National Insurance contributions for British expats: the facts

There seems to be a lot of confusion regarding the payment of National Insurance contributions (NICs) and the benefits of the state pension for UK expats.

What I want to achieve with this article, therefore, is to give you an idea of the basic facts regarding the basic state pension and the necessary steps that you would need to take, should you want to make contributions on a voluntary basis and/or make up missed payments.

Armed with this information, you will then be in a position to make an educated decision on how to proceed.

Basic facts

To achieve a full basic state pension you need to have achieved a certain number of qualifying years. A qualifying year is a year where one of the following applies:

  • you have sufficient income to pay NICs
  • you are treated as having paid NICs
  • you are credited with enough NICs

If you are a man born after 6 April 1945 or a woman born after 6 April 1950, then you need to achieve a total of 30 qualifying years in order to achieve the full basic state pension.

For the tax year 2011/2012, the full basic state pension will be £102.15 per week. This will increase annually by the highest of one of three index rates: prices, earnings or 2.5%.

If you have fewer than 30 qualifying years, your pension will be reduced on a pro rata basis. For example, if you only had 15 years, you would get £51.08 per week (15/30 = 50% of £102.15).

Step 1 – find out where you are now

Your first step should be to contact the State Pension Forecasting Team in Newcastle and ask for a pension forecast.

This will tell you the number of qualifying years that you already have as well as the level of state pension that you can currently expect.

Their telephone number is (+44) 191 218 3600. If you contact them, they will then send you the completed relevant form for you to sign and return to them. (Remember, as with all communications with HMRC, to have your NI number handy when you call.)

Alternatively, if you want to speed the process up, you can download the relevant form here (PDF file, 295 KB) and send it directly to them. The address to send it to is:

State Pension Forecasting Team
The Pension Service
Tyneview Park
Whitley Road
NEWCASTLE-UPON-TYNE
United Kingdom
NE98 1BA

Allow them a few weeks to get back to you.

Step 2 – make voluntary contributions

The next step, if you don’t already do so, is to start making regular voluntary contributions. There are two types of contribution that you can make, either Class 2 or Class 3.

To qualify for Class 2 NICs, you must have been “ordinarily” employed or self-employed immediately before you went abroad. (If you are in doubt as to whether you qualify, contact National Insurance Contributions – International Caseworker Team on (+44) 191 225 4811.)

If you don’t qualify for Class 2, then you need to make Class 3 NICs.

Class 2 contributions have the following benefits:

• they count towards your state pension when you retire;
• they entitle you to Employment and Support Allowance (previously known as Incapacity Benefit) and bereavement benefits when you return to the UK.

Class 3 contributions have fewer benefits. Namely, they don’t entitle you to the Employment and Support Allowance when you return to the UK.

In addition, Class 3 contributions are more expensive. For Class 2 contributions, the payment is equivalent to £2.50 per week (2011/2012). Class 3 payments are equivalent to £12.60 per week (2011/2012)

As you can see, wherever possible, it makes sense to pay Class 2 Contributions.

To commence contributions (Class 2 or 3) you need to complete the form CF83, which can be found on the last 2 pages of the NI38 document. You can find a copy here.

Payments can be made monthly by Direct Debit or with an annual payment.

Step 3 – make up missed years

If you haven’t been making any contributions for some time and still do not have 30 qualifying years, then you can make up missed years going back for the last 6 years. Your State Pension Forecast (mentioned above) will tell you how much you need to pay to make up each of these years.

Instructions on how to make payments for these missed years will be on the forecast letter.

PG Author: Ross Naylor

Ross Naylor is a UK qualified financial adviser who has been advising expatriates on personal finance for the past 10 years. He writes a regular financial column in an English-language newspaper in Warsaw where he is based, as well as his own ezine and a blog: http://www.aes-rossnaylor.com/blog.

24 Comments

John 19-08-2012, 14:24

If i earn under just £155 a week, and sometimes only £146, does that not mean i am exempt from paying NICS due to my low income…. or are you implying that i need to be making up for lost years and paying my own on top ?

The other things is this – i was in a highly paid job before the recession and was contributing a high amount of NICS for about 10 years. Are you telling me that that my large contribution to NICS still only qualifies as 10 years out of the required 30 ?

Surely i am not getting punishsed by the Government for trying to get any type of work rather than simply claiming the dole, and getting my NICS paid for me ?

Ross Naylor 20-08-2012, 07:42

Hi John,

Thank you for taking time to respond to my article.

If you are not resident in the UK, then you do not have to pay any NICs no matter how much you earn.

The point of the article was to explain how those expats who wanted to make “voluntary” contributions could do so.

Re your second point “Are you telling me that that my large contribution to NICS still only qualifies as 10 years out of the required 30 ?”, I am afraid that is exactly the case.

Best regards,

Ross.

Joanne 13-09-2012, 03:04

Hi Ross

I was making voluntary class 2 contributions while I am here in Australia. In the last three years I have stopped because I have given birth to two boys who are both autistic (I get a carers allowance in Australia and the children are registered disabled). I would like to pick up the last three years and continue paying in voluntray contributions. However as a full time carer for two disabled children, I don’t have formal employment.
1. Does this mean that I have to pay the more expensive class 3 contributions?
2. How would the NIC agency know if I am formally employed or not?
3. Why does one have to pay more when one is earning less / nothing?
Thanks for your great explaination, very useful.
Regards
Joanne

Ross Naylor 14-09-2012, 03:49

Hi Joanne,

The test for Class 2 contributions is normally based on whether you were “ordinarily” employed or self-employed immediately before you went abroad. Given that you paid Class 2 previously, I would assume that this was the case.

However, if you still have any doubt, I would advise contacting the National Insurance Contributions – International Caseworker Team on (+44) 191 225 4811.)

Best regards,

Ross.

Gozomark 27-09-2012, 09:55

Hi Ross

http://www.hmrc.gov.uk/ni/volcontr/abroad.htm states

“Provided the earlier conditions are met you can pay voluntary Class 2 National Insurance contributions if you are employed or self-employed abroad”

ie if you are living overseas, below retirement age but not working you can’t make class 2 contributions – is that correct, as I didn’t spot that as a criterion in your article ?

Mark Gillespie 12-01-2013, 05:48

Hi Ross

If I go to work temporarily in Australia for less than a full UK tax year, am I liable to pay NI contributions on the foreign income (I know I am liable on any tax above what the ATO has deducted as I still need to submit a self-assessment for renting my flat out)?
And will that year still qualify as a year I contributed NI, even though I only worked for a few months in the UK before moving?

Aman 16-01-2013, 22:34

Hi Ross,

What are the advantages of paying NI to a foreign national who comes to UK just for few years (3-6 years) on a working TIER 2 visa.
Is he needs to pay NHI on the top of NI?

Cheers!!!

Darren Gilby 18-01-2013, 21:02

I have recently been trying to catch up back payment years of NIC’s to boost my eligible pension. I have about 12 total paid years so far and am 15 years away from retirement with eligibility to pay 2 more back years. (29/30)total. However I’ve been paying the class 3 rate even though I was employed directly before I emigrated to Canada back in 1982. Should I be paying class 2 rates?

clam 25-01-2013, 00:03

Similar query to Darren. I have made class 3 payments (for years 08/09 and 09/10) but now I realise that I qualify for class 2. I have never submitted the CF83 form. I wonder if I can correct these payments.
And if I submit the CF83 form now, indicating that I qualify for the past 6 years, can I then back date payment for the 6 years.

Regards

clam 25-01-2013, 00:24

Quote:

“To qualify for Class 2 NICs, you must have been “ordinarily” employed or self-employed immediately before you went abroad.”
Am I correct to add registered unemployed also accepted?

stherese 18-03-2013, 17:17

They are in the process of changing all these rules , so that you have to have 35 qualyfying years and not 30 :(

AP 03-05-2013, 08:07

Hi Ross
I am a British expay living in Spain.
I work for an offshore company and therefore do not pay social security in Spain. If I pay NICS in the UK will this cover any medical issues I may have in Spain under the bilateral healthcare agreement?
Thanks

Michael Hacking 27-05-2013, 15:20

Hello, Ross.

I read with interest, because many of us ex-pats get into trouble by not expecting a future worst possible scenario case, and for that reason do not do our homework on the pitfalls of making a working life out of our unemployed stagnation at home.

i came from a small town with not much work, but thought my periods of unemployment payments included tax and NICs’, in order to maintain my eligibility for such payments, periodically over a period of 30 years.

Presumably these do not always fit the category of ‘odinary work’, but can I request to pay back Class 2 NICs’ on the basis that relevant deductions were made?

With many thanks.

Michael

June Dorsett 20-06-2013, 16:20

I have been living in Barbados, since 1983, I am now nearing pension age and would like to know the status of my pension. I know I will not be getting a full state pension. Also, I am told I have to return to the U.K. in order to get my pension is that true.

Meehan 26-03-2014, 05:29

I am in my 70’s and moved to mexico 8 yrs ago from uk. I didn’t have med insurance and recently was taken into hospital. The bills are mounting up and I don,t have a means to pay them. I worked all my life in uk and paid all my taxes and nic contributions. Can I get help with my medical bills from uk?

Dave McMahon 26-03-2014, 12:55

Hi, Meehan, and sorry to hear about your problem. NI contributions only give you entitlement to cover overseas if there’s a reciprocal agreement between the UK and the country concerned. Unfortunately at present it doesn’t look as if there is one between the UK and Mexico – the current list is available online on the NHS Choices website here:
NHS Choices: Travelling outside the European Economic Area (EEA)

Anon 07-04-2014, 15:26

I’m struggling to understand the philosophy behind why someone who is not working has to pay ten times more for their contributions (ie class 3) than someone who is working (ie class 2)? Someone who is not working has less money to contribute, so this doesnt seem to make any sense at all?

Dave McMahon 15-04-2014, 07:18

I take your point, but it doesn’t necessarily follow that someone who isn’t working has less money to contribute. Just because people have no earnings, it doesn’t mean that they have no income. Class 3 contributions are voluntary, after all – which suggests that they’re an option for people who don’t have to work and have enough spare cash to consider bumping up their social security.

Shona Macleod 18-06-2014, 11:18

If I pay voluntary NI contributions while working abroad does it mean I still have access to NHS services when in the UK?

Dave McMahon 19-06-2014, 06:01

Unless you’re still resident in the UK, I’m afraid probably not, Shona. Your entitlement to healthcare depends on UK residence rather than whether or not you’re paying NI contributions – if you’re non-resident, then normally you won’t get free NHS treatment unless you’re working in the European Economic Area and can produce a Form S2 or E112 issued by the country you’re working in.
HMRC: Benefits of paying UK National Insurance while abroad
NHS Choices: Moving abroad: planning for your healthcare

Sarah Watson 28-06-2014, 07:36

Hi,

I worked in the Uk for 4 years before working overseas. I have worked for 5 years in Italy, 1 year in Finland, 5 years in Japan, 5 years in Switzerland and 1 year in Tanzania (where I am working now). Please could you inform me whether these countries have a reciprical tax agreement.

Thank you

Dave McMahon 28-06-2014, 12:56

Not really on topic, Sarah! You should be able to find out from the HMRC website.

Aly Bannister 25-07-2014, 06:31

Hi, I have been living in Australia for 6 and a half years. I have not been paying any UK NI contributions for that whole time. I am a permanent resident here, but want to make up my missing NI contributions for when I retire. I have paid 20+ years before leaving the UK. I was employed “ordinarily” up to the time I left. Can I still make up contributions because I have been here more than 6 years?
Any help is appreciated.
Thank you, Aly

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