Hundreds of thousands of people crossed the Irish Sea in the 1980s and after the 2008 financial crash in search of a new life, building roads and cities, teaching in schools, nursing in hospitals, or working in finance. Many of them returned to Ireland in the belief they had left their UK state pension behind them.
ow, these returned immigrants have a chance of a lifetime to benefit from their time in Britain, with the UK government effectively subsiding them to top up their UK pension. Thanks to a temporary concession, Irish people who worked for at least three consecutive years in Britain and paid national insurance (the equivalent of our PRSI) can buy back as many as 16 extra years to their UK pension, instead of the usual six. And by continuing to make voluntary national insurance contributions in the years ahead, some of those former emigrants could claim both a full Irish and full UK state pension in retirement.
“The UK government is not exactly writing to everyone in Ireland to say ‘you are entitled to this’,” says Colm Moore, managing director of Moore Wealth Management. “But there’s no better financial advice than to buy back these pension years. It’s an A-rated guaranteed income from UK government.”
How do I qualify?
You must have 10 qualifying years on your national insurance record to receive the minimum UK state pension. If you want the full pension, which currently stands at £185.15 (€210.85) a week, you’ll need 35 years on your record.
However, even if you haven’t worked the required amount of time to reach the minimum 10 years, you can make voluntary contributions to increase your record, as long as you already have three years contributions. Having ten years on your record would entitle you to 10/35ths of the full pension, or £52.90 per week.
You have until July 31 to pay voluntary contributions to make up for gaps between 2006 and 2016. But after this deadline, you will only be able to pay contributions to cover the previous six years. Buying 16 years’ worth of contributions would bring you closer to the 35 years required for the full state pension. And if you have enough years left until you retire to continue making voluntary contributions, you could reach the 35-year threshold and claim the full UK state pension. Combined with the full state Irish pension of €265.30 per week, you could be commanding €475.87 a week — or €24,745.24 a year (excluding double payments) – in state pensions alone.
“If you were a 66-year-old at the moment living in the UK and were trying to buy an annuity for life that would give you the equivalent of the UK pension, it would cost you at least £250,000 to buy that benefit,” Moore says. “But you’d be buying it for a fraction of the cost.”
Why the urgency?
A window of opportunity to top up UK pension entitlements by 16 years was due to end on April 5, but due to a surge in enquiries leading to a backlog in processing applications, the UK government last month extended the deadline until July 31.
“The backlog in applications was between 20 to 30 weeks, which is why there was an extension” to the deadline, says Marc Westlake, who is managing director of Everlake and is qualified to operate as a financial planner in both the UK and Ireland.
How much will it cost?
The cost of topping up your UK pension depends on whether you have to pay class 2 (non-resident) or class 3 (resident) contributions, with HM Revenue & Customs (HMRC) determining which category you are in.
The cheapest option for buying national insurance contributions is class 2, which costs about £163.80 for each pension year. If you are categorised as class 3, you will have to pay £824.20 to buy each pension year.
But even if you buy years at the more expensive rate, you would have made your money back if you lived for 3.5 years after you retired, compared to about six months by buying at class 2 rates, says Nick Charalambous, managing director of Alpha Wealth, who in March held a webinar on the subject.
However, confusion reigns over whether most returned Irish immigrants will be classified as class 2 or class 3 by HMRC.
How to apply
The application process takes time and there’s a backlog, so get the ball rolling now. Most of the process is conducted online and if you’re in any way tech-savvy and are comfortable filling out forms, you could find the process relatively straightforward. If not, some financial advisers will do it for you.
Step 1
You’ll need your national insurance number and your passport. The latter should ideally be a biometric passport, because you’ll be using your phone to scan the passport to authenticate your identity.
If you’ve lost your national insurance number and you only left the UK in recent years, you may be able to find it on old payslip or a P60. If you don’t have any documents, go to gov.uk/lost-national-insurance-number. If you still cannot find it, you can call the national insurance helpline on (0044) 1912037010 and answer some questions but be prepared to be on hold for quite a while. If you cannot answer these questions, you’ll need to fill in a form called CA5403 and send it to the address on the form. HMRC will post you a letter containing your number but it takes around 15 working days for this letter to arrive.
Step 2
With your national insurance number and passport to hand, go to tax.service.gov.uk/check-your-state-pension/account. You’ll be given a Gateway ID number, which you need to keep a note of. You will then be required to download the Gov.uk ID Check app to verify your identity.
Using your Gateway ID, log onto gov.uk/checkstatepension to check your pension forecast. This will show your national insurance record, how many years of contributions you have, and which years of contributions you are missing.
Step 3
To buy back UK pension years, you need to complete the CF83 application form, which you can find in Pdf format at gov.uk/government/publications/social-security-abroad-ni38. Print off the CF38 form and send it to HMRC by registered post.
You can check the progress
of your application after at
least two weeks on tax.service gov.uk/check-your-state-pension/account
using your Gateway ID and password.
The changes
The UK introduced changes to its state pension in April 2016, when it introduced the so-called New State Pension, which is worth more but also requires more years of contributions.
“They were trying to enhance pension benefits for people,” says financial planner Marc Westlake says.
To qualify for the full new pension, which applies to a man born on or after April 6, 1951 or a woman born on or after April 6,1953, people generally require a 35-year record of paying national insurance contributions – up from 30 years under the previous regime.
Under normal rules, it’s only possible to plug gaps in your national insurance record up to six years after the year in question. But under transitional arrangements, which were due to end on April 5, 2023, but were extended until July 31 due to an influx of inquiries, people who come under the new state pension system are able to plug any missing years from the 2006/2007 tax year onwards. This means people can currently pay for up to 16 years missing from their record.
Financial planner Colm Moore says: “Because the UK changed the qualifying period from 30 years to 35 years in 2016, you had people who were approaching retirement age and then found that the goalposts had changed. So, they brought in an option for people to buy back 10 years from 2006 to 2016.”
Despite Brexit, both Irish and UK citizens living in Ireland can still benefit from social insurance contributions they made when working in the UK.
