Your move to Spain is complete and you’ve settled in to your new house, work and lifestyle. But what about your future here?
Will you be here at retirement age, and will you be eligible for a Spanish or a UK pension? You might think that the most logical course of action would be to transfer your UK National Insurance contributions to Spain, but the current procedure is simpler. Do nothing!
New laws that came into effect in May 2010 affect workers moving around the EU, and consolidate the arrangements between member countries. To summarise, if your situation is covered by UK social security arrangements you must pay UK Class 1 National Insurance contributions on earnings arising from activity in the UK. If your earnings pay into the social security system of another country then no UK contributions are required. Does this sound complicated? Basically, people are subject to the social security legislation of the EU country where they carry on their work. They pay their contributions only to that Member State.
The National Insurance contributions that you have paid in the UK remain within the UK system until you reach retirement age. Then an assessment will be made and the country with the minimum qualifying period will provide your pension. In effect, your pension may come from either the UK or Spain, or a combination of the two in circumstances where your payments have been almost equal into both systems.
If you are living in Spain in 2011, the current retirement age is 67 and you will need to have paid into the Spanish system for 38.5 years to qualify for a full Spanish pension. However, the years you have paid into the UK system can be taken into account and contribute towards your qualifying years. This is reassuring to hear for most people!
The current retirement age in the UK for men is 67 but this is increasing over time. In practice there is a sliding scale so that by 2046 retirement age for men and women will be 68. You can assess your official UK State Pension Age using an online calculator at:
Receiving a pension
From recent experience, the Spanish pension system is fully functioning to make the procedure simple and effective. You simply contact the Instituto Nacional de la Seguridad Social (INSS) if you have spent any time working legally in Spain. Their office will inform the UK that you have made a claim and they will contact you to make a second claim (if necessary) within the UK system. There is no need to fear that the two countries will not communicate on your behalf as this system is currently active and people are already receiving pensions as a result of this ongoing arrangement.
If you live in Spain, but have never worked here, simply use the UK system by contacting the International Pensions Centre (address and details below). You can also contact them if there are any changes to your details like a different bank account or change of address. For security reasons, never send your full details by email; instead contact the office by telephone or in writing, as this means your information cannot be obtained for use fraudulently.
In April 2010 the UK pension system changed and the qualifying period is now only 30 years (from 44 and 39 for men and women respectively). You can qualify for a proportion of a pension with only one qualifying year, but this can be increased by Home Responsibilities Protection – any years spent caring for a dependant or sick relative or as a foster parent may contribute towards your qualifying years.
If you have any concerns about a shortfall in your pension, you can contact the Department for Work and Pensions to obtain a State Pension Forecast, and see whether increasing your voluntary NIC’s might be beneficial. However, if you are employed or self-employed in Spain, this is not necessary, as you are effectively paying into the Spanish system.
Legal tax position
If your working arrangement combines work in both countries, it can be confusing to ascertain where you should be paying taxes, for instance if you work for a haulage company and travel regularly, spending some time living abroad. If, for any reason, you are not sure about whether you have paid sufficient national insurance contributions to cover your entitlement to benefits, you can contact HM Revenue and Customs (HMRC) for an assessment – or the INSS in Spain. Then you can make the voluntary payments to top up your entitlement OR you can be issued with a certificate that confirms you do not have to pay contributions into another country’s social security scheme.
Be reassured however, that EU Regulations have now simplified the processes which protect your entitlement to benefits including pensions. Your National Insurance contributions will pay towards your benefit entitlement whether you live and work in Spain, or the UK, or a combination of the two. So all you have to do is continue working hard and paying into the system wherever you live.
International Pension Centre
Newcastle Upon Tyne
Telephone: +44 191 218 7777 Fax: +44 191 218 7021 http://www.direct.gov.uk
Department for Work and Pensions
State Pension Forecasting Team
The Pension Service
Newcastle upon Tyne