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Should I Pay Voluntary National Insurance Contributions to the UK ?

Should I Pay Voluntary National Insurance Contributions to the UK ?

Before entering this particular minefield you need to confirm whether you have ever paid any contributions in the UK. If you have, it means you may have a vested interest in continuing with the UK system, but you need to assess this for your future plans.

The HMRC (HM Revenue and Customs) rules mean that some people, for instance those working in Spain for a UK company or as coach or lorry drivers for instance, may need to continue to pay UK National Insurance contributions when they work overseas. These rules can help you to remain in the UK’s Social Security system when you go abroad. In many countries, where you continue in the UK scheme, you can be exempt from foreign Social Security contributions.

Current EU Regulations however mean that people from every country in the European Economic Area (EEA) are generally treated the same and have their benefit rights protected for as long as they are:

*Employed or self-employed; or

*Have been employed or self-employed and are getting benefit; or

*are close family members of people who are or have been employed or self-employed; or

*a student who is studying or receiving vocational training leading to an officially recognised qualification – in this case, only limited rights arise.

So you can apply for your State Pension in Spain and the Spanish authorities will contact HM Revenue & Customs NICO International Caseworker on your behalf to obtain details of your UK National Insurance contributions record. In some circumstances your contributions may help towards your claim if you have not completed sufficient qualifying years in Spain.

But what is the benefit to you in continuing to make UK contributions after you have moved to Spain permanently?

When you are no longer required to pay compulsory contributions to the UK, you may be able to pay voluntary contributions to protect your right to some Social Security benefits, to contribute towards your State Pension or bereavement benefit. These are more likely to be relevant if you think there is any chance that you may return to the UK in future.

A Retirement State Pension Forecast will tell you how much state pension you can expect to get as an overseas resident based on the UK National Insurance you have already paid as well as:

*If you can pay voluntary UK National Insurance contributions to increase your state Retirement Pension

*How much your state Retirement Pension could be increased if you pay them.

If you are living in Spain and not within four months of your State Pension Age you can get a State Pension forecast by writing to HMRC, Charity Assets and Residence, Residency, Newcastle, Benton Park View, Newcastle Upon Tyne, NE98 1ZZ England. They will send you Form CA3638 to fill out and return, or you can do this online at: http://www.hmrc.gov.uk/cnr/osc.html

When you get your forecast back, you can consider your options, either to make payments into the system and reap the benefits or if the contributions you require are too great, you can choose to do nothing, and rely on the Spanish system (although bear in mind it will be applied under current Spanish rules and you may not have any automatic right to certain benefits.)

If you are living in any EEA country including Spain you should claim as follows:

*If you have worked in the country you are now living in, your claim for your UK State Pension should be made through the pension institution in that country.

*If you have not worked in the country you are now living in, you should claim your UK State Pension direct from the International Pension Centre, unless you have worked in another EEA country since leaving the UK, in which case you should make your claim through the last institution you were insured with.

You can contact the IPC by phone on +44 191 218 7777 or via the Direct Gov website at: http://www.direct.gov.uk/en/Dl1/Directories/UsefulContactsByCategory/Over50sContacts/DG_178684

If your State Pension forecast suggests that it is in your interest to make voluntary contributions, you need to decide how and when to pay them – either in a lump sum or spread over quarterly or monthly payments by Direct Debit.

There are different types of Voluntary Contributions open to you; however they all have a qualifying period which is generally before the end of the sixth tax year for the tax year you are paying for. This means the tax years prior to 2004 are no longer under consideration, except in exceptional circumstances. 2004-05 payments must be made by 5 April 2011, 2005-06 by 5 April 2012 and so on.

If you reach State Pension Age after April 2010, you will qualify for a full state pension if you have 30 qualifying years on your National Insurance record. If you have less than 30, you will receive a proportionately lower pension (i.e. if you have 23 qualifying years, your pension will be 23/30ths of the full amount). You only need one qualifying year to get some pension.

If you are employed or self-employed in Spain, you can still choose to pay UK contributions voluntarily for the years that you are eligible as protection in the event that your contributions here will not be sufficient. In this case, you would pay Class 2 NIC’s as long as:

*You have lived in the UK continuously for more than 3 years at any time

*You previously paid in a set amount of NIC for those 3 years

*And immediately before leaving the UK you were normally an employed or self-employed earner or registered unemployed i.e. your details are in the system somewhere.

Failing that, Class 3 contributions are voluntary payments you can make if you are not liable for Class 1 (employed) or Class 2 (self-employed) contributions. These can either be paid quarterly or by Direct Debit every four or five weeks in arrears or as a lump sum at the end of every tax year.

You can pay through various methods outlined on the HMRC website at: http://www.hmrc.gov.uk/payinghmrc/index.htm - Either way, if you have any doubts about your eligibility for a State Pension, your qualifying years or whether to make voluntary contributions, it may be advisable to contact HM Revenue & Customs NICO International Caseworker to discuss your case individually.

The offices are open from 8.00 am to 5.00 pm, Monday to Friday (but closed weekends and bank holidays) on +44 191 203 7010 or email your query via http://www.hmrc.gov.uk/cnr/email.htm

Comment on this Article

 
Martin : As in the UK, In Spain the contributions you have made are unique to you, and are not transferable.
Tumbit - Admin - Fri 9th May 2014
Thanks fot the info. Glad i will not loose contributions. The chap buying my business has asked if I can transfer my 10yrs contributions to him as he has no payments into system. I have told him that I don't think this is poss. Or legal but i said i would ask. Can u advise. Thanks.
Martin Barlow - Fri 9th May 2014
Martin : No, the contributions that you have made in Spain are still safe. Shortly before your retirement age, the UK Pension office will send you a statement advising you of what they believe you have made, and what you are entitled to claim. It is at that stage they give you the opportunity to advise them of any payments you may have made into any affiliated EU Country's scheme - so remember to keep a record of your NIE / Spanish Social Security details !
Tumbit - Admin - Thu 8th May 2014
I have worked in UK for 28 years and paid some first class contributions and second class contributions when self employed. I then move to Spain and have paid into the Spanish system for 10 years. I am now about to move back to UK and wonder if I will loose everything I have paid into the Spanish system. I also have somebody taking over my little business in Spain and he wanted to know if I could transfer my years of payments in the Spanish system into his name so that they would not be money lost over the years. Confused any help would be great Thanks Martin
Martin Barlow - Thu 8th May 2014
Norman : You don't mention if you have worked in Spain and contributed into the Spanish Social security system ? - You might also find that the 'How to Guide' > HERE < helps with some of your questions.
Tumbit - Admin - Wed 6th Feb 2013
I would like to know if i can merge a UK state pension with a Spanish state pension. If i have worked in the UK and contributed to the state pension for those years can i transfer this contribution to the Spanish system. If this cannot be done can i claim two different pensions when i do retire.
Norman Jermon - Wed 6th Feb 2013
NI contributions to the uk will help towards any claims that you might wish to make for benefits here in Spain. EG: BENEFIT FOR 55 YEAR OLDS,. You need 15 years paid towards a pension , 2 years have to be within the last 12 years, within the 15 years you must have 6 years that are class 1 contributions. You cannot have any income from anywhere else,you will then receive a payment of 426 € a month and you get credits towards your Spanish pension each month. You can still work but every time you have a contract your benefit is stopped, when you are once again unemployed you renew your 55 year olds benefit and receive 426€ credits towards a pension. If you work for 12 months you will claim unemployment benefit for 4 months and then after that once again renew you 55 y benefit. You must be reg with El INEM , now SEPE and not sure but I think you have to have worked here in Spain. Your NI contri don´t move from UK you just use them . SEPE.ES
Gjm - Mon 24th Sep 2012
Sue, you will receive 10/30 ths of the standard / full pension in your own name. You can also arrange to have this paid into an overseas Bank account in your local currency and without paying any extra fees or commissions to receive it here in Spain.
Pauline Eccles - Wed 18th May 2011
Please could you help ? I have 10 years contributions towards a state pension in U.K. I now live in Spain. My husband has 15 years self employed contributions in Spain.I have never worked in Spain. I am 60 and qualify to draw my pension in January 2012. My husband will be 65 this November so can therefore begin to draw his pension then. I understand that he gets a small extra payment as I am dependent on him. If I claim my small pension when I qualify will he loose the allowance for me? Can I have the U.K. pension paid into a relatives account in U.K. as I have no bank account of my own there. It would give me a bit of independence as I could afford to go and visit family there without having nto ask my husband for some of his money. Or is it possible to combine both pensions without him losing the allowance he gets for me as between us it will only amount to 25 years of contributions in all, and we have no other savings. He is English but paid no contributions in U.K.He does not ever
Sue Smythe - Wed 18th May 2011
I look at this in simple terms, (some say that's all I am capable of) but if I was offered a scheme whereby I contributed about £500 a year at the end of each year for 30 years in return for a weekly amount equal to the UK state pension (currently £97.65) increasing each year by the retail price index then it is worthy of serious consideration.If the scheme grew by 10% p.a. it would be worth in the region of £28,000 which would only cover about five years of pension payments.There are some other considerations here but during these uncertain times this looks to be a no-brainer.!
Tony Green - Thu 2th Dec 2010
My own take on this is that it is a gamble. I left the UK 6 yrs ago having paid 16 yrs into the system, and faced with roughly 500 Quid a year to pay if I chose to make the remaining years up voluntarily. - With 14 more years to pay, and a further 30 or so years until I can make I claim I need reassurances that A) There is still even going to be Pension in 30 years time, and B) The Minimum pensionable age hasn't gone up to 80 or something like that. - Otherwise I firmly belive that I could invest the 500 quid to provide for my future much better myself !
Mr Grumpy - Thu 2th Dec 2010
Very comprehensive article. Personally I think it's always worthwhile keeping up with the state pension contributions, because (a) it's a pension (albeit small) that is underwritten by the Government and (b) the contributions can be as little as the cost of a few pints of milk each week (depending on your situation)
James Alexander - Wed 1st Dec 2010