By Paul Roberts
This article is published on: 24th July 2020
This guide is compiled to help you find out more about your UK state pension entitlement and explain how you can top-up your entitlement by making voluntary contributions.
Most of the leg-work can be done on-line using the HMRC sites.
The sites are a joy to navigate, so don’t be fearful! Let’s go.
• To get some general information about UK state pension entitlement / the amounts you will receive and how to claim it etc, click onto the following link;
https://www.gov.uk/new-state-pension
• To check when you will be entitled to receive your UK state pension, click onto the following link;
https://www.gov.uk/state-pension-age
• To check how much UK state pension you will get , you need to click onto the following link, https://www.tax.service.gov.uk/check-your-state-pension but before you can get onto that link; you need to open up a “government gateway account” by clicking on this link and following the instructions;
https://www.access.service.gov.uk/registration/email
….and to set up the government gateway above you will need your National insurance number, your mobile phone and your passport to hand. It is a straightforward process. Once you are set-up you will be given a password, a user ID which in conjunction with an access number, given via your mobile phone, allows you to access your HMRC data and check your state pension entitlements by clicking onto;
https://www.tax.service.gov.uk/check-your-state-pension
• If you can’t remember what your National Insurance Number is then click on the following link;
https://www.gov.uk/lost-national-insurance-number
To see the exact number of years that you have contributed, click here;
https://www.gov.uk/check-national-insurance-record
If you want to investigate how to fill in the gaps by making voluntary national contributions (and this is the interesting bit) then click onto the following link;
https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions
You can make top up by paying Class 2 NIC’s very inexpensively; provided you meet the conditions:
If you scroll down on https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions – to living and working abroad you will see the following information;
If you qualify, this is the one to go for:
You can check out the following (excellent) site for a well written account of what you might get and who might be entitled to get it.
https://www.healthplanspain.com/blog/expat-tips/318-paying-uk-national-insurance-when-living-in-spain.html
To pay Class 2 NIC’s go to the following link and click on PAY NOW and follow the instructions
https://www.gov.uk/pay-class-2-national-insurance
There is a bit of form filling to do but the benefits are well worth the effort, or at least that was very much my case where I was able to backdate my contributions by 7 years at a cost of around 1000 GBP. These 7 years contributions entitle me to around 7/35 of the state pension which is something of the order of 175 GBP a week from the age of 66 in my case. If one assumes that I get there and live to be an average age, then I’ll pass away age 85ish.
So, what will I gain?
Investment 1000 GBP. Average benefits 7/35 x 175 GBP x (85-66) x52= 34,580 GBP. Wow! And that is all indexed linked. AND, apart from backdating you can set up an annual payment and keep making contributions easily and automatically by direct debit. All well worth looking at .
Good luck with it all and let me know how you get on.
By John Lansley
This article is published on: 22nd May 2020
If you have moved from one country to another, while it may be comparatively easy to obtain tax advice in order to help you plan your finances, it can be very difficult to find out how your State Retirement Pension will be affected, and this has become more uncertain as a result of Brexit. This article aims to shed some light on the issue
This article aims to shed some light on the issue.
I retired in the UK and moved abroad
Let’s start with something easy – if you have already retired and moved to Spain, France or another EU country, the chances are your only State Pension will be from the UK. With Brexit in mind, as long as you were legally resident in your new home country by the end of 2020, nothing will change, and you will be entitled to the annual pension uplift indefinitely.
Coupled to this is your entitlement to healthcare, in that you will have a form S1 from the UK, which ensures you benefit from full care on an ongoing basis, and which in effect will be paid for by the UK Government.
If you have already left the UK but have not yet reached formal retirement age, as long as you were ‘legal’ in your adopted home before the end of 2020, you will receive the UK State Pension at retirement age and qualify for annual increases. You will also be entitled to a form S1.
Note that, if you have not regularised your situation in your adopted home by the end of 2020, the situation is uncertain, to say the least. You will be entitled to claim the UK State Pension when you reach retirement age, but the uplifts are only due for 3 years and, most importantly, form S1 will not be available.
I left the UK 5 years ago at the age of 55 and have been self-employed in Spain for the last 5 years
Have you been making voluntary contributions to the UK scheme? Are you making contributions in Spain? If you haven’t already done so, obtain a pension forecast from HMRC – use the gov.uk website, sign up for the Government Gateway access service, and check your National Insurance Contribution records, as well as your UK tax records. You’ll have to apply to contribute, using form CF83 attached to the booklet NI38, Social Security Abroad.
You will then be told what pension you can expect at your retirement age, and you can also see how many incomplete contribution years you have. It is generally good advice to continue to make voluntary contributions after leaving the UK (currently £795.60pa), but if you are currently self-employed, you will only have to pay at the Class 2 rate, which is £158.60pa for the current year.
You’ll receive details of how to make up the shortfall, by bank transfer or cheque for past years, and by direct debit for the future if you wish to see payments taken automatically. Importantly, you can also call to obtain advice concerning whether it would be worthwhile doing this, and how additional payments will increase your pension entitlement – it might take a while to get through, especially due to the current Coronavirus lockdown, as it appears they are only dealing with those on the point of retiring, but you should find the staff helpful when you do.
Also, make sure you understand what your Spanish contributions entitle you to and try to obtain a projection of your future pension in Spain. This might prove difficult at present, with offices closed or providing limited services.
Having worked in the UK, Italy and now in Spain, I want to claim my State Pension
The first thing to understand is that you should retire formally in the country you are currently living in, unless you haven’t made any pension
contributions there – in which case you apply to the last country in which you contributed.
So, in this case, you approach the Spanish authorities and will have to provide details of all your employment and self-employment history. Spain will then check with each country concerned (the EU-wide scheme ensures this is possible – work history outside the EU means you may have to apply individually to those countries) and will calculate your entitlement. (But bear in mind that Brexit may have had an impact on this in practice, even though the scheme should not be affected – very much ‘work in progress’).
They will do this by adding together the contribution years of each country and then applying this to their own pension rules. This means that, even if you don’t have the minimum number of years’ contributions in one country, the chances are that the contribution years in other countries will ensure you get a pro rata pension. Don’t forget, official retirement age can vary in different countries, and some state pensions are more generous than others.
Each country will then pay their share directly to you, and if you have continued paying into the UK system it’s likely you’ll end up with a much higher pension than might otherwise have been the case.
How is healthcare affected? Any other issues?
The good news is that receiving your pension locally will mean that your access to the local healthcare system comes with it – no need for a form S1. So, any attempts by the UK to remove themselves from the S1 scheme will not affect you.
Note that, although the UK state pension is paid regardless of your other income, the state pension in Spain is not, in that if you wish to continue to work, Spain will not pay anything to you.
Other financial planning tips?
Despite the UK government’s attempts to water down the ability to ‘export’ your UK private pensions using the QROPS arrangements, this is still possible – but perhaps won’t be for much longer. So, obtain advice about whether such a move would be beneficial, as soon as possible.
Any savings or capital you have should be invested tax-efficiently and with the aim of protecting it against both inflation and exchange rate fluctuations. Stock markets can fluctuate too, sometimes dramatically as we have seen, so be careful you understand the amount of risk your investments are exposed to, and seek help from a suitably qualified professional who will be able to help you over the long term.
By Derek Winsland
This article is published on: 8th June 2018
A major part of my role as a Financial Planner involves helping clients move towards retirement and advising those in retirement about the best and most tax-efficient way of generating their income once they stop work.
One question I’m often asked is how much money I should save to enable me to retire comfortably. A good question, it depends on what constitutes a comfortable retirement for that particular person. It’s generally quite a straightforward discussion: how much do you need now, and what will change as you approach retirement (mortgages redeemed, no more school or university fees, travel expenses to and from work for instance). Factor in extra expenses for pursuing hobbies, travelling etc. and we begin to build a picture of what retirement will look like and how long the active retirement period will last for.
In the UK, a Which? survey concluded that, in the UK at least, a couple entering retirement needed £26,000 a year to live comfortably. OK, that’s the UK and not necessarily representative of life here in France, but it is a basis for opening a discussion. The next consideration is to identify what the sources of income are – likely there will be an entitlement to UK state pension, possibly some French state pension and maybe rental income form letting out the old UK home, or Gites in France.
For those people actively thinking about and planning for retirement, it is also likely there will be some private pension provision, perhaps even membership of a final salary pension from time spent working for an old employer. And then there are the savings you’ve set aside for the day when you can put down those work tools, and say “That’s it, I’ve done my bit”.
But what income can I reasonably expect those savings to generate to supplement the other sources of income. The Institute and Faculty of Actuaries have ruminated over this question (well they would, wouldn’t they! I can imagine the topic of conversation going around the dinner table at their annual conference). The conclusion they’ve come to is (not surprisingly) based on the life expectancy of the retiree. Retiring at age 55, they believe you should draw down only 3% of your capital each year to ensure that your money doesn’t run out. This then rises to 3.5% if retiring at age 65. Other financial experts believe the figures could rise to 5% per year for a 65-year-old. This then assumes that your capital is invested to generate returns greater than the rate of inflation.
The options for the individual facing an income shortfall include:
A Financial Planner can draw up a future forecast using established assumptions for inflation, rates of investment return, the most tax efficient way of drawing down or generating income, using either life expectancy tables or any other age after discussing your family mortality history with you. This will give you your ‘number’, the amount of capital you’ll need to live comfortably.
The Office for National Statistics has recently launched an online tool on its website designed to tell you what your life expectancy is. If you’re curious, click here:
Once completed this Financial Plan should be implemented to address any recommendations for re-structuring the existing assets, and thereafter reviewed yearly, updating the investment returns achieved and the impact this has on the capital, checking any changes that need to be made to the assumptions and making any amendments that you want included. Long-lost pension funds will be identified, and the expected benefits brought into the plan, and again, any issues addressed. The move is towards handing the responsibility of retirement over to the retiree, so there is not a better time to consult a fully qualified financial planner.
If you have personal or financial circumstances that you feel may benefit from a financial planning review, please contact me direct on the number below. You can also contact me by email at derek.winsland@spectrum-ifa.com or call our office in Limoux to make an appointment. Alternatively, I conduct a drop-in clinic most Fridays (holidays excepting), when you can pop in to speak to me. Our office telephone number is 04 68 31 14 10.
By Spectrum IFA
This article is published on: 16th February 2018
It is widely known that Europe’s ageing population is a problem for EU Member States. Quite simply, people are living longer and this impacts on the sustainability of State pension systems, referred to as the first pillar. Member States may attempt to address this issue by raising State pension ages and increasing the number of years that people need to qualify for a full State pension. However, this then impacts on the standard of living that retirees can expect to attain, unless additional provision is made.
In some Member States, employees may benefit from occupational pension schemes that are sponsored by their employer. These are known as second pillar schemes and if a promise of a defined benefit pension related to salary and service is on the horizon, then this is highly advantageous. However, employers too are feeling the strain of funding such promises and so are increasingly closing defined benefit schemes and putting in place alternative defined contribution plans. There is no benefit promise and the employee will get whatever the eventual ‘pension pot’ purchases. In short, the risk of meeting the target benefit is passed on to the employee.
Third pillar pensions are also ‘money purchase’ and these sit on top of the first and second pillars. Voluntary by nature, these plans can make the difference between a comfortable or a poor retirement. Such additional pensions may also provide a ‘bridge’ to State retirement pension commencement, if the benefits can be accessed before the State retirement age. However, without appropriate and regulated advice, the saver may find out all too late that their aspirations for a financially secure retirement are not met. Saving sufficient amounts and investing the monies wisely are both essential requirements, but so too is taking advice.
Pension entitlement is a complicated subject. Regular reviews with the adviser should be carried out to check that the ‘pension pot’ is on target to achieve objectives. Generic on-line advice is unlikely to be enough, particularly if the person has accumulated several ‘pension pots’. Moreover, if a person has had a cross-border career, how does the ‘pension pot’ acquired in one State dovetail with one in another State? How are the State pensions earned in each Member State impacted by the EU State pension co-ordination rules? How do the diverse tax rules across Member States affect the outcome for the saver? These are just a few of many questions that should be addressed by the adviser – a robot cannot do this!
In June last year, the European Commission launched its proposal for a Regulation on a pan-European Personal Pension Product (PEPP), as a third pillar pension. In States where the first and second pillar systems are not well-developed, the PEPP may offer a solution for citizens who may be facing a poorer retirement. In other States, the PEPP should provide more choices to its citizens.
Whilst the PEPP initiative is welcomed, the Regulation as drafted, already presents some barriers to becoming a successful cross-border pension arrangement. The PEPP has the potential to contribute to the Capital Markets Union, but only if the barriers are overcome. Regulatory and fiscal rules diverge between the 28 Member States and so pragmatism and co-operation are needed to reach a solution. If the tax incentives are insufficient, and subject to change after an arrangement has commenced or even harmonised, the PEPP is unlikely to succeed.
The PEPP Regulation proposes a limited number of investment strategies be made available by PEPP providers. This includes a “safe investment option”, as a default option, which should provide a capital guarantee. The merit in capital guarantees for pension products is questionable, as these are expensive to provide. The result being that to support the capital guarantee (if in fact a real guarantee can be provided – and by what institution?), this would require low-yielding investments and consequently at retirement, the capital may be insufficient to provide an adequate level of income to supplement other pensions. Thus, the reference to a “safe investment strategy” could be misleading to the saver.
However, rather alarming is the proposal that the PEPP saver can waive the right to receive advice, if he/she selects the default investment option. It is arguable that PEPPs should not be sold on a non-advised basis, even in these circumstances. The Regulation as currently drafted could lead to the saver losing purchasing power, since an obligation to provide inflation-proofing has not been included.
Furthermore, the impact of national pension entitlements, varying decumulation options and retirement ages, particularly if the PEPP saver has cross-border accumulated benefits, strengthens the need for the PEPP saver to receive appropriate professional advice. Hopefully, the European Commission will also come to this conclusion.
This article was published on The European Federation of Financial Advisers and Financial Intermediaries website
Daphne Foulkes is a Board Member of the FECIF
By Barry Davys
This article is published on: 14th September 2017
During the ongoing Brexit negotiations, many of us Brits living abroad have been concerned about our fate following March 2019. Thankfully, Britain and the EU have now reached a solid agreement about the rumoured ‘freezing’ of the state pension after Brexit, and the result is very positive indeed – state pensions will continue to increase for those of us living in the EU.
To read the full article please click here www.telegraph.co.uk/pensions-retirement/news/britain-eu-reach-agreement-expats-state-pension-brexit/
