Back-pay your UK National Insurance contributions asap

This is for people who have lived or worked in the UK before. For the rest of you, you can skip this one or pass it on to someone who might be interested.

Short version: it’s extremely cheap for expats (or former expats!) to contribute to their UK state pension, which makes it probably worth it (like £12,000 a year worth it).

Currently you can back-pay for missed years back to 2006. From 6 April, it will be limited to 2019. You don’t even have to be a UK citizen. Get the online form submitted before 6 April and you’ll be safe from the deadline.

But first…
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It’s worth it

The UK state pension requires a minimum of 10 years’ contributions, with a maximum of 35 years. You contribute while working in the UK or by making voluntary contributions while abroad (I’m going to skip minor details and edge cases here for all our sanity).

The state pension is soon increasing to £230.25 per week. That’s £997.75 per month and £11,973 per year, which you can access from age 66-68 currently.

That’s free money for you. It’s the equivalent of having an extra £300,000 in your stock & bond portfolio! [300,000 * 4% = 12,000, 4% being the ‘safe’ withdrawal rate per year.] If there’s two of you, that’s an extra £600,000!

Will the state be bankrupt then by the big increase in oldies (and mismanagement…)? Possibly, but I wouldn’t bet on it. I also think the government could increasingly tie freebies like the NHS to National Insurance contribution levels, so you could really regret not paying if you find yourself back in the UK.

If you retire in the UK or most of Europe, your state pension will increase each year. Living in most other countries, the pension will be fixed when you reach 66-68 and so be eaten away slowly by inflation. But it’s still a good deal.

Contributions

Unlike many other countries, the UK allows you to contribute while you’re overseas. Bizarrely, it’s 5 times cheaper for expats working abroad to fill in any years missed – due to working abroad – than it is for UK residents filling in gaps. UK residents have to pay ‘Class 3 contributions’ of £17.45 per week (so £907.40 per missing year), while expats only have to pay ‘Class 2 contributions’ of £3.45 per week (£179.40 per year). Brilliant!

If you’re back in the UK now, you can still pay Class 2 for the years when you worked abroad. Also brilliant! Not everyone realises that, so tell your friends before 6 April.

To pay voluntary Class 2 National Insurance contributions, you must:

be working or have worked abroad during the period you’re applying to pay for AND
have worked in the UK immediately before leaving.

Once you are approved, you can also set up a direct debit to cover this year and future years while you’re working abroad.

Note it’s not worth paying more than 35 years of contributions, as you don’t get anything extra. So if you know you will soon return to the UK and have a salary for the next 20 years, you may not need to back-pay missing years. What if you got sick though? It could be worth just paying up now, it’s not that expensive for expats anyway.

Check your record of National Insurance contributions per year

[If you’re in a hurry and you know there’s at least one year of 2006-2019 you’ve missed due to working abroad, then skip this bit for now and just get the CF83 form filled in before the 6 April deadline.]

The page below will give you access to your state pension value, plus the record of how many years you have contributed to and which years are missing.

https://www.gov.uk/check-national-insurance-record

You will need a Government Gateway account, but you can set that up from this page with your passport to hand.

Click on View Your National Insurance record and then on the green button saying View payable gaps.

The record page will tell you that each year will cost you £824.20 (or similar), because it doesn’t know you are eligible for the cheaper Class 2 contributions – ignore this number.

Now things get a bit confusing…

You can click on Check if you can pay for gaps online and fill in a short questionnaire. If you are working abroad, or have been, it’s going to tell you that you can’t pay online. This is stressful. It’s also badly worded.

What they mean is that you can’t pay by card then and there. That’s fine, you will just have to fill in an online form called CF83 (see below) and get approval for Class 2 contributions.

Once they tell you that you can’t pay online, there is the option to request a callback from the Future Pensions Centre, even to an international phone number. If you submit the request form before 6 April, you will have beaten the deadline and can still make payments later for years 2006-2019. So it’s probably worth it.

Then go to the page below and fill in the CF83 online form. Once you submit that form, it’s highly likely that you will have also beaten the deadline (an HMRC support person confirmed that on the phone to one of my clients).

If you want to make sure, you can fill in both the callback request form and the CF83 form (CF83 being much more important).