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