How to claim the UK pension in Australia [Updated March 2024] March 19th, 2024
For our Netplan fans who may have worked in the UK sometime in their lives, here’s a very special article to sink your teeth into.
This article provides information on a lifetime retirement pension scheme called the UK State Pension, backed by the UK Government, for Aussies and ex-pat Brits who have worked in the UK.
Imagine an investment that generates more than 100 percent per annum!
Normally, the dodgy alarm bells should be ringing loud and clear, but when it’s backed by the Government of the United Kingdom…
(This is another example of what we’re about here at Netplan. We’re not here to flog you a new investment or an expensive management service but rather, provide rock-solid information you can use.)
Aussies and ex-pat Brits who worked in the UK, have just a few weeks to take advantage of what is arguably, one of the world’s most extraordinary financial opportunities.
Eligibility and Payment
An individual may claim UK State Pension even if they live in Australia and have no intention of returning to the UK. To be eligible to receive a payment, one will need to have the equivalent of ten years' worth of contributions. At ten years, an individual would receive 10/35th of the full rate. That is the minimum rate anyone can receive.
The 2024 rate of State Pension for someone who qualifies after April 6 is £221.20 per week. If an individual meets the minimum ten-year requirement, they will be entitled to 28.57 percent of that figure or £63.22 per week for life.
Once you qualify, you can select the frequency of the payments from either 4 weekly or every 13 weeks. You can nominate the bank account whether here in Australia or the UK.
In both cases, it is assessable income for both tax and Centrelink purposes.
Currently, the eligibility age is 66 but like Australia, that is slowly increasing to 68 years of age. To check your actual eligibility age, put in your date of birth here.
Voluntary Contributions
What’s really great about the UK system, is that if you are a few years short to get a partial pension or even the full rate, you can back-pay the shortfall.
To be able to make any back-payments you must have at least three years worth of contributions already in the system.
UK authorities allow two types of voluntary contributions, Class 2 and Class 3. How much an individual needs to pay will depend on the circumstances leading up to their departure from Britain and if you are working here in Australia. If an individual left work immediately before their departure, they would be eligible to make Class 2 contributions, which currently work out to be £179.40 per year. Each contribution year buys an additional 1/35th of the State Pension, so that currently works out to be £328.64 per annum. The effective return on this outlay is 183 percent, paid every year, for as long as an individual lives.
If an individual does not meet the eligibility criteria for Class 2 contributions, they can make Class 3 contributions. The current Class 3 rate is £907.40 per year. Each year, this buys an extra 1/35th of the full rate, so the effective return is 36 percent for life. An individual may back-pay up to six years if they are under pension age and then continue to make an annual payment until they reach pension age.
The only real risk with this opportunity is that you won’t live to reap the benefits. If you die before you reach pension age or only collect a few payments in retirement, nothing extra is returned to your estate or your loved ones.
Why you should get in quickly
Update April, 2024
Special concession to pay-back an extra ten years has now been extended to April 2025!
Until April 6, 2025, there is a special concession that allows individuals to increase the amount they pay for up to ten additional years, meaning that sixteen years worth of payments is possible. After the deadline, individuals will only be able to back-pay a maximum of six years. An individual will need to get a quote from the UK for their current entitlements and what payments they can make. They can do this by calling the UK national insurance hotline (0011 44 191 218 3600) or filling out the BR 19 Form. They will then receive a quote and a form to make additional contributions.
They’ll send you a quote and you can then make the additional contributions using the form that’s included at the back of the special pamphlet explaining the system for people living overseas which you can download from here.
Conclusion
This scheme is one of the most extraordinary financial opportunities for those who have worked in the UK. It allows for the establishment of a significant retirement income stream backed by the UK Government. Using this scheme may mean that some of an individual's savings and super are no longer needed to provide them with income in retirement. The saved money can be used to spend on other things like travel, new cars, or even a more expensive home.