National Insurance and State Pension for Temporary UK residents

kiashi

Hello,

I am a dual citizen UK/Australia who grew up in Australia. I have now been living in the UK for a year and am working full time. My employer has just offered us a new pension scheme. I have read about contracting out of the state pension and putting my money into my employers pension scheme. I am just trying to figure out if this is the best option for me.

A Colleague told me that you must remain a resident of the UK for at least 11 years before you can access a state pension. Therefore I may be wasting some of my NI contributions because I don't currently plan on staying in the UK for that long.

I was also wondering if it is generally a fairly easy process to transfer money from a private UK pension scheme to a similar scheme in Australia, or how I may access my money in the future if I am not resident in the UK.

I appreciate any help with this,
Thanks

EdInvestor

kiashi wrote: »

A Colleague told me that you must remain a resident of the UK for at least 11 years before you can access a state pension.

That's never been the case.Under the current rules, you have to have made 10 years worth of NI contributions to get any state pension at all.That rule will be dropped for anyone who retires after 2010.Residency is not relevant. Most people can make voluntary NI contributiuons from anywhere in the world if they have already built up some state pension - though this doesn't appply to all nationalities.

Therefore I may be wasting some of my NI contributions because I don't currently plan on staying in the UK for that long.

You have no choice about paying NI contributions anyway.

I was also wondering if it is generally a fairly easy process to transfer money from a private UK pension scheme to a similar scheme in Australia, or how I may access my money in the future if I am not resident in the UK.

You can transfer a private/company scheme to Oz under the QROPS scheme ( see https://www.hmrc.gov.uk ) or you can leave the pension invested here and then draw it after you turn 55 in Oz.

Note that you can continue to contribute voluntarily to the UK state pension when you leave, and costs are low.Although the UK pension is not uprated for inflation in Australia, the Australian state pensio is means-tested and thus few get it, so it may be worth maintaining your UK state pension long term as an alternative.

kiashi

Thank you for your prompt reply EdInvester, now I understand about the 10 year state pension rule, that makes sense to me because I was having trouble locating information about that.

EdInvestor wrote: »

You can transfer a private/company scheme to Oz under the QROPS scheme ( see www.hmrc.gov.uk ) or you can leave the pension invested here and then draw it after you turn 55 in Oz.

With regards to the above I just looked on the website and noted my Australian Superannuation Fund was not in the hmrc list, this was then confirmed by visiting their website on which they state that they are not members of hmrc's QROPS scheme so unfortunately it looks like I'm not going to win there.

Note that you can continue to contribute voluntarily to the UK state pension when you leave, and costs are low.Although the UK pension is not uprated for inflation in Australia, the Australian state pensio is means-tested and thus few get it, so it may be worth maintaining your UK state pension long term as an alternative.

Continuing NI contributions may be a viable option, I guess I will look at this when I head back to Australia taking into account how many years I end up working in the UK.

Maybe I should look at getting a small pay rise out of my employer instead of taking up the pension scheme and put that into my Australian Superannuation Fund as voluntary contributions instead for the remainder of my time in the UK, any thoughts?

EdInvestor

kiashi wrote: »

With regards to the above I just looked on the website and noted my Australian Superannuation Fund was not in the hmrc list, this was then confirmed by visiting their website on which they state that they are not members of hmrc's QROPS scheme so unfortunately it looks like I'm not going to win there.

This may simply be because no-one has asked them to sign up. You could also transfer your Uk pension to a different Oz fund, no need to put all eggs in one basket.

Maybe I should look at getting a small pay rise out of my employer instead of taking up the pension scheme and put that into my Australian Superannuation Fund as voluntary contributions instead for the remainder of my time in the UK, any thoughts?

Would there be any tax or other benefit to doing that now as a non resident in Oz? You might be better to save the money in a UK ISA and then move it to Oz when you leave.

Cook_County

If you invest in an ISA or pension plan here you could be subject to the harsh FIF regime in Australia if you leave the money over here.

As a non-dom you would have other non-UK options open to you but if yur non-UK investment returns/gains exceed £2,000 a year you would lose your UK personal tax allowance so these may not be suitable.

I see no disadvantage in investing in a UK pension & rolling to a QROPS (via a good IFA) unless the value will be so small it would all be eaten up by the costs of the transfer.

kiashi

Cook_County, thanks for your response

Although I'm not 100% on what you mean by FIF regime, I imagine it's something to do with foreign income.

My current thinking is to start with the pension plan that my employer is offering and then probably just leave the money in it until I reach retirement age. After discussions with my HR person I can't see my employer offering me any other options, such as a pay rise so I suppose I should take advantage of what little they are offering with the pension.

I will then look at an ISA for any extra money I can put away.

Cook_County

There is a neat summary here:

http://www.mondaq.com/article.asp?articleid=61634

Leaving a pension in the UK could be very expensive so this is why you need advice.