For many years I have recommended all of my UK clients to pay voluntary national insurance contributions (NICs). Payment of voluntary NICs is important because some UK benefits like the Basic State Pension and the New State Pension (NSP) are linked to a person’s contribution record.
The NSP has a maximum benefit of £159.55 per week. To receive any benefit you will need at least 10 years NICs or equivalent. Under current rules, those just entering the work-force will need 35 years of contributions to qualify for the maximum benefit.
As expatriates, there are currently two classes of NIC we may be eligible to pay: class 2 (£2.85 per week) and class 3 (£14.25 per week). With effect from 6th April 2018 class 2 will no longer be available.
So, is it still good value?
Let’s take a 18 year old starting work in July 2017. He needs to pay £14.25 a week NICs for 35 years. NICs are increased in line with inflation as are benefits, so in today’s money he will pay £14.25 x 52 x 35 = £25,935 over the course of his working life to qualify for the maximum benefit of £159.55 per week / £8,297 a year. There is no commercially available product which will provide this level of security and return. Therefore NICs, even at the class 3 level, continue to represent extraordinary value for money. If you qualified for Class 2 contributions the benefit is even greater.
What Does It Mean?
Before you pay any money into private pension arrangements you should make sure you are paying voluntary NICs. You should also make sure any missing payments are made where possible.
How do I Find Out My Contribution Record?
This used to take a long time. Now with the Government Gateway portal you can find out in five minutes. All you need is your National Insurance Number and Passport. Click here to register.
What Can I Do To Increase State Pension Benefit?
You can make back-dated voluntary contributions for up to the last 6 years. Click here for more information.
What if I Retire Outside UK?
Many expatriates retire outside of UK, so I have included this link which should be useful State Pension Abroad.
Please let me know if you have any questions.