Voluntary National Insurance - HMRC’s Best Kept Secret
Going abroad - even for less than a tax year - can create gaps in your National Insurance contributions record.
What most expats don’t realise is that they can avoid these gaps from occurring by electing to pay voluntary NIC whilst they are abroad. With a weekly cost for most people of £2.70, I am amazed that HMRC don’t do a better job of promoting this to people who they know are leaving the UK to live or work abroad.
Benefits of paying UK National Insurance while abroad
If you move abroad, continuing to pay NIC may help keep your entitlement to:
· certain state benefits in the European Economic Area (EEA) and some reciprocal agreement countries
· certain state benefits and allowances if and when you return to the UK
· a full State Pension
Everyone needs 30 years NIC to get a full State Pension.
Paying voluntary contributions means you can avoid gaps occurring, which is particularly useful if you live abroad and not required to pay National Insurance.
Who is eligible?
If you want to pay voluntary National Insurance contributions while abroad, either of the following conditions must apply:
· you must have lived in the UK for a continuous three-year period at any time before making your payments
· before going abroad, you paid NIC for a minimum of 3 years
If you qualify, you can normally make up any gap in your NIC record for the previous six tax years.
UK pension reform
HMRC advise that before deciding to pay voluntary contributions people should consider the Government's proposals for simplifying the future State Pension. One of the aims of these reforms is to introduce a single-tier pension from 5 April 2016. The single-tier pension will require 35 qualifying years of NIC or credits for the full amount. There will also be a minimum qualifying period of between 7 and 10 qualifying years.
Those with less than 35 qualifying years but more than the minimum qualifying period will receive a proportionally smaller state pension.
The UK Government plan putting in place transitional arrangements to recognise people’s NIC records before the implementation date. On this basis my advice to anyone who is abroad or going abroad, is to pay voluntary NIC until such time a single-tier pension is introduced.
Martin Glick is Operations Director of My Tax Matters who specialise in the UK tax and social security affairs of people living and working outside the UK.