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UPDATE: UK State Pension Top-Up Deadline

Eligible UK expats and Aussies that worked in the UK have been granted extra time to top up their UK State pension entitlements.  The initial cut-off date for new rules impacting the amount you can top up was initially slated for 5 April 2023 and then subsequently pushed back to 31 July 2023. Given the significant level of enquires received by HMRC and their ballooning turnaround times, the date for the rule change has now been extended again.

The new deadline is 5 April 2025, giving UK expats in Australia even more time to top up their National Insurance (NI) contributions to increase their entitlement to the UK State Pension. The change in rules can dramatically impact the amount of pension eligible individuals may receive in retirement, or whether they can receive anything at all. As such, even though you now have more time to top up, it’s important to act soon to ensure you don’t miss out.

Are You Eligible for the UK State Pension?

To determine if you qualify for the UK State Pension, you’ll need to assess your National Insurance record. If you have ever worked in the UK and paid National Insurance (NI) contributions, you will have an entitlement to the UK State Pension, even if you are not a UK national. To be eligible to claim a pension, you must have contributed a minimum ten years’ worth of NI contributions. If you have not reached this minimum, you can make voluntary contributions to fill any gaps, provided you have lived and worked in the UK for three continuous years.

The NI rate you pay to top up (Class 2 or Class 3) depends on a few factors – more on that below. Class 2 rates are preferable as they present a cheaper option compared to Class 3. After you top up your NI record and reach the UK State Pension age, you will receive a pension based on the number of NI contributions you have made. A maximum Basic State pension requires 35 years of contributions.

Current Top-Up Rules

Currently, if eligible, you can make a one-off backdated NI contribution to cover missed years from 2006-07 onwards. By topping up your NI contributions now, you make a small initial investment for a significant return once you reach the state pension age. This means you can purchase a total of 16 years’ worth of NI contributions to fill gaps in your record ensuring you meet the minimum 10-year threshold and increasing your entitlement to the desired level. What’s more, the maximum basic state pension increased to £203.85 as of April 2023.

Changes to UK State Pension Top-Up Rules

From 5 April 2025, you will only be able to make voluntary backdated contributions for the past 6 years, as opposed to the current maximum of 16. This rule change effectively reduces the amount that you can increase your entitlement or potentially render you ineligible for a UK State Pension if you have fewer than four qualifying years on your NI record.

Next Steps & How We Can Assist

Navigating the UK State Pension system can be challenging, especially when eligibility and cost are affected by rule changes and a changing deadline. If you have worked in the UK for three or more consecutive years and have not yet topped up your National Insurance record, it is advisable to act now. Once the deadline of 5 April 2025 passes, your ability to increase your entitlement will significantly diminish, potentially impacting your retirement income. The main upshot of having more time to get your top-ups in is that you can potentially spread the cost of doing so over a longer period, while still guaranteeing increased income in retirement.

Our colleagues at Pension Transfer Specialists can assist you in determining your eligibility for the UK State Pension, the top-up rate applicable to you, and submit the necessary information to HMRC on your behalf. Please don’t hesitate to get in touch with the PTS team on 08 9301 2200, or visit the UK State Pensions page on our website for more information.

written by:

Will Lyons

Will has 15 years industry experience working in both consultant and technical positions. Prior to becoming a qualified Financial Planner in Australia, Will worked as a pensions consultant in the UK gaining Advanced Diploma qualifications whilst working there. He has also attained an Advanced Diploma in Financial Planning and has completed the FASEA Financial Adviser Exam and Ethics qualification.

At McKinley Plowman, Will has progressed over the years from our UK Pensions Division all the way through to senior Financial Adviser and now Associate Director within the Wealth team – amassing invaluable experience and knowledge along the way.

Will is a keen cyclist and occasional triathlete that loves going out and socialising with friends.

Will is an Authorised Representative of Fortnum Private Wealth Ltd.