Retirement

UK State Pension Guide For Expats

The state pension is a source of frustration for tens of thousands of British expats who feel unfairly treated by the UK government.

Expats argue that they have paid into the social security system for years but do not get the deal they were promised as their state pension is frozen for no other reason than they chose to live in the wrong country.

The row over uprating – increasing the payment each year in line with the cost of living rises – has rumbled on for years, reaching the highest courts in Europe, but expat pensioners have lost their fight at every turn.

Pension age v retirement age

Don’t confuse the state pension age with your retirement age.

In the past, they were the same – most people received their state pension from the age of 65, which also happened to be when they gave up working.

The state pension age is 66 years old for men and women. However, anyone born after April 5, 1960, will see their state pension age gradually climb to 68.

The state pension age replaces the old state retirement age, which was scrapped some years ago. Now, anyone can retire when they want but will not receive money from their state pension until they are 66.

What is state pension uprating?

Uprating the state pension increases the payment in line with the cost of living.

Expats paid the UK state pension in one of the countries listed below to pick up the same uprating as someone receiving the pension in the UK.

The main uprating tool at the moment is the triple lock.

The triple lock ensures the state pension goes up every April by whichever is the highest rate from:

  • 2.5 per cent
  • Inflation taken from the consumer price index (CPI)
  • The average rate of wage increases

Inflation is compared in September, and the rate of wage increase in July, with any increase, is paid from the following April 6.

Which countries uprate the state pension for expats?

The government pays the state pension to around 1.2 million expats, according to the Department of Work and Pensions.

The pension is increased in line with cost of living hikes in the UK for 700,000 expats – but the remaining 500,000 are excluded from uprating.

Their pensions are frozen at the amount of the first payment.

For example, two expats receive the maximum state pension of £185.15 a week on their 66th birthdays. One lives in the USA, where the payment is uprated and the other lives in Australia, where no uprating is paid.

After a year, the payment is uprated by 7 per cent in line with UK inflation. The expat in America receives an extra £16.66, taking the pension payment to £201.81, while the payment to the expat in Australia stays the same with the gap widening every year.

Here’s the list of countries where the expat state pension is uprated:

AustriaGuernseyMontenegro
BarbadosHungaryNetherlands
BelgiumIcelandNew Zealand
BermudaIrelandNorway
Bosnia-HerzegovinaIsle of ManNorth Macedonia
BulgariaIsraelPhilippines
CanadaItalyPoland
ChileJamaicaPortugal
CroatiaJapanRomania
CyprusJerseySerbia
Czech RepublicKosovoSlovakia
DenmarkLatviaSlovenia
EstoniaLiechtensteinSouth Korea
FinlandLithuaniaSpain
FranceLuxembourgSweden
GermanyMaltaTurkey
GreeceMauritiusUSA

Some notable names are missing. Australia, for example, is the most popular destination for British expats, with 1.7 million taking on a new life Down Under.

Many Commonwealth nations also fail to make the list, like India, Pakistan and South Africa.

The government argument

The government has argued against a blanket uprating of expat state pensions regardless of where the recipient lives.

The DWP has worked out that uprating every expat state pension would cost the Treasury an extra £600 million a year, which, it says, is money the country cannot afford. Also, taxpayers would have to contribute more to fund the pensions of those who have chosen to live abroad

The government also explains that expats knew their state pension status before they left the UK and should have planned their finances accordingly.

Recently, Work and Pensions Under-Secretary Guy Opperman confirmed the government has no plans to change state pension rules for expats.

How much is the state pension?

The state pension is split across two systems – the basic state pension and the new state pension.

The fork came on April 6, 2016, when the new state pension was introduced. The main difference between the two is the number of qualifying years of National Insurance contributions someone needs to build.

The state pension is paid every four weeks in arrears, so the first payment comes four weeks after your 66th birthday.

Basic state pension

Expat men born before April 6, 1951, and women born before April 6, 1953, are paid the basic state pension. The maximum payment is £141.85 a week (£7,376.20 a year).

To qualify for the maximum, workers must show 30 years of full NI contributions. If you have less than 30 qualifying years, the pension is paid pro-rata.

For example, if you have 25 qualifying years, the payment is £141.85 divided by 30 multiplied by your number of qualifying years, giving a £118.20 payment.

The new state pension

Expats reaching their state pension age on or after April 6, 2016, are paid the new state pension. The maximum payment is £185.15 a week (£9,627.80 a year).

To qualify for the maximum payment, workers must show 35 full years of NI contributions, and like the basic state pension, those with fewer years receive a pro-rata payment.

For example, if you have 25 qualifying years of NI contributions, the payment is £185.15 divided by 35 multiplied by your number of qualifying years, giving a £132.25.

Claiming the state pension

The state pension is claimed, not an automatic payment. To claim the pension, expats must either:

A claim cannot go in more than four months before your state pension age.

No state pension is paid If you have fewer than 10 full years of NI contributions.

Tax and the state pension

The state pension is taxable but paid gross – without any income tax deducted.

For 2022-23, the tax-free personal allowance is £12,570. If you are paid the full state pension, after deducting £9,627.80 from the personal allowance, you can earn an extra £2,942.20 without paying income tax. If you receive the state pension, you do not pay NI.

Checking your state pension claim

Expats can download a free state pension forecast online that tells you how much you are likely to get, when you can claim and how to increase the payment if you can.

You can also download and post a BR19 application form or call the Future Pension Centre

Expat guide to the state pension FAQ

Can I have a state pension in two countries?

Yes, you can draw the state pension in more than one country as long as your circumstances match the qualifying rules.

Can I still work and earn if claiming the state pension?

Yes. Receiving the state pension does not mean you cannot continue working or draw an income from investments. However, if the income and state pension come to more than the personal income tax allowance of £12,570, you may pay tax on the excess.

Can I transfer the state pension to a SIPP or QROPS?

SIPPS and QROPS are personal private pensions for expats. Pension rules do not allow the transfer of a state pension into either scheme.

What is a Certificate Of Age Exception?

HM Revenue and Customs issue a Certificate of Age Exception to anyone who has reached state pension age but keeps working. The certificate is proof no Class 1 NI contributions should be deducted from your pay.

Like the state pension, you must claim the certificate. Write for more information to

HM Revenue & Customs NICO
Contributor Caseworkers
Benton Park View
Longbenton
Newcastle upon Tyne
NE99 1ZZ.

Must I take my state pension?

If you elect to delay taking your state pension for five weeks or more, you get an extra 0.2 per cent pension for each week you have put off your claim. The payment continues until you die.

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2 thoughts on “UK State Pension Guide For Expats”

  1. This article is incorrect. Pensioners/seniors who live in Canada, Japan or New Zealand (where did the author get this list of countries from?) do not receive the annual increase so, whilst they have a reciprocal agreement with the UK it does not extend to the uprating of the State Pension. I find it incomprehensible that the author of this article does not know. It has been well publicised in the media that UK seniors/pensioners living in Canada, Japan or New Zealand do not receive the annual increase. There is no mention that the UK Government abandoned the triple lock agreement this year because of an anomaly in the average wage increase last year. This anomaly was caused by the pandemic. They say they will restore it this year, which will be interesting, given that inflation could be 10% by September, which is the cut off date for finalising next year’s rises.

    Reply
  2. Canada, New Zealand and Japan are on the list of countries where the UK state pension is uprated, and this is definitely not the case.

    Reply

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