retirement
expat finances - National Insurance and State Pensions
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I could have sworn that I’d written a very similar post to this before, but I couldn’t find it. In any case, I get asked quite a few questions about expat finances from British people living overseas (especially the US) and I know that a few readers are expats living in the UK. I thought this information - whose discovery was inspired by a conversation I had with a friend the other day - might be useful to you.
Did you know that British National Insurance scheme (the one that qualifies you for your state pension) is reciprocal with a number of other similar schemes in other countries?
This means that if you are British and you work abroad you might be able to use your contributions there to qualify for a state pension over here, and vice versa.
The rules vary from country to country, but for example, if you have worked in the US and you haven’t paid NI for enough qualifying years to get a full British pension, you can treat the time that you spent paying Social Security to qualify. The amount you would get would be based on how many years you paid into both schemes, and the proportion of time you spent in each scheme.
Suppose you spent 10 years working and paying NI in the UK, and 20 years working and paying Social Security in the US. In the UK, they would calculate how much pension 30 years contributions would give you and pay one third (10/30) of that. In the US, they would calculate how much pension 30 years contributions would give you and pay two thirds (20/30) of that.
It works pretty much the same, as the agreement with the USA for all the countries in the EU - except of course that you could have worked in all 25 (or more) of them.
For Britons living in Canada, if you are not entitled to Canadian Old Age Security pension, you haven’t lived in Canada for more than 20 years, and you live in the UK for the 10 years prior to your retirement, your time in Canada is treated as if you paid contributions to the UK.
If you spent time in New Zealand, but return to the UK to retire, any time you lived in New Zealand will be treated as if you paid contributions in the UK, for the purposes of qualifying for the British State Pension.
Similarly, if you retire in New Zealand, any time you lived in the UK will be treated as if you paid contributions in New Zealand for the purposes of qualifying for New Zealand Superannuation. Any money you receive from the UK will be deducted from your Superannuation though.
If you are living in either New Zealand and Canada (or most other countries), once your State Pension starts being paid out it there will not increase. You can get more details from the Department for Work and Pensions, where you can also find information on the other reciprocal agreements with:
- Barbados
- Bermuda
- Israel
- Jamaica
- Jersey and Guernsey
- Mauritius
- Philippines
- Turkey
- Yugoslavia (and former republics)
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13 comments for “expat finances - National Insurance and State Pensions”
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Plonkee, this is brilliant, as my wife is American and we’ve been a bit non-plussed about what would happen to her 16+ years of Social Security contributions.
Thanks for this, when I first moved I didn’t pay much attention to this as I came on a one year visa, now it’s 2.5 years and counting so I need to make sure it’ll work out when I move back. I know my S/O’s mum had to pay backdated NI contributions when she moved back to the UK after a couple of years in Canada. Do you know anything about private company pensions and how they would transfer to another country, I would like to sign up for mine now I’ll be here a bit longer but I’m not sure how it would work out.
@Looby:
I can’t remember whether you’re in the UK now or not.
If it’s a British pension, you can transfer it to a qualifying overseas scheme (QROP), HMRC keeps a list. I’m not sure whether these sorts of things are reciprocal.
In general though I think that you can keep investments in overseas schemes, it’s just that they may lose their tax favoured status abroad (so for example, your British personal pension may be subject to Australian tax if you moved over there). Expat tax issues can be complicated and (obviously) depend on the country pairings involved. Consult a specialist tax advisor if you need more help.
Thanks Plonkee, I’m currently in Canada. I’ve never spoken with an advisor because it’s all hypothetical up till now, when my savings are actually beginning to grow, but your links and info are helpful. I suspect you are some kind of information hunting guru!
This is very interesting information. The world is growing smaller… People are moving abroad much more often than they used to, and this will affect many more people in the future than it currently affects. Great article.
Humo(u)r me here please, are you saying in your example the entitlement is to 1/3rd of the UK amount ( I think around 97 pounds right now ) and 2/3rds of the US pension?
Or is it just that the number of years are credited so that the country of domicile pays the full pension of that country?
Thanks very much in advance
Best regards
Nick
@Nick:
That depends on the pairs of countries involved. It’s my understanding that for the UK-US in the example then you would get 1/3rd of the UK amount and 2/3 of the US amount. That’s definitely the way it works between the UK and Ireland, and almost certainly for the rest of the EU.
If you want to know more, try contacting HMRC and/or the relevant overseas tax body.
Thanks for your answer, I will check and post it when I know
Hello Plonkee,
My question is = I am already receiving a social security pension from the US I am 66 now and will be returning to UK shortly to reside permently, I am a UK citizen born in the UK,I have worked in US for 32 years and a total of 12 years ACTUAL WORK and paying NHI stamps in UK, in your example does that mean that I will also be eligible to receive one third of the UK state pension? with no deductions in regard to the UK means test from my US social security? thank you, and your site is great by the way, and very helpfull,
intersting..