uk and Spanish state pensions

biorb

good afternoon. Not sure if anyone can help with this but have no idea where to find help. 

Myself and my wife live and work in Spain paying Social in Spain and also paying towards the UK state pension.

I have 29 full years in the Spanish system and 27 years in the UK system. I have an option to pay up to 8 years in UK to make up for missing years at 165 pounds per year.

My wife has 19 uk years and 16 years in Spain. She has the option to pay 12 years UK top up, 8 years at 165 pounds and 4 years at 825 pound,

Now the question, is it worth paying this money?  Thank you if you know the correct anwser to how the 2 pensions work

pinnks

I would suggest it is worth paying the UK years.

When you reach pension age in each country you claim your state pension from that country, so will end up with two state pensions, one from the UK and one from Spain.  As you were resident and contributing in both countries before the end of the Transition Period, you fall under the Withdrawal Agreement.  This means that the EU rules on the coordination of social security systems continue to apply to you.  Those rules say that you make your claim to the pension authority in your country of residence.  Here that would be the DWP. 

If your UK pension age comes first, then you will claim your UK pension as usual and, as part of the process, will indicate that you have also worked in the EU.  If your Spanish pension age comes first you will contact DWP and say you wish to claim your Spanish pension.  Either way, you will then receive a form CFN901 from DWP, which you complete and return to them.  They forward the appropriate information from the 901 and your NI records to the Spanish pension people who either award your pension without further correspondence, or contact you for additional information.

The EU rules on aggregation and pro-rata benefits will apply.  In the UK they will not make any difference, other than helping you to get past the 10-year requirement, which, of course, you already do.  Your UK pension will therefore be what your forecast already shows.

I don't know how the Spanish rules work but the EU rules on the coordination of social security systems require that they undertake 2 calculations and award the higher amount as a pension:

1. they calculate a pension looking only at your Spanish contributions and applying their rules. This is called the Independent Benefit (in essence what they do for any person claiming a pension in Spain) and, if there is a minimum-years requirement that you do not meet with your 29 years, this amount could be zero.  For instance, I have heard that Spain requires you to have at least 2 of your last 15 years in work and contributing.  If you were not resident in Spain you could not meet this requirement.

2. they calculate a "theoretical amount" by assuming all of your work history and contributions were made in Spain and applying their rules on that basis. This amount is then apportioned on a pro-rata basis to your actual Spanish years.  This is called the Pro-rata Benefit.  It seems to me (though some people have suggested otherwise and I have not seen a comment from anyone directly impacted) that if you spent all of your final 15 years away from Spain but contributing in another EUMS/UK, then the 2 in the final 15 must be met when one assumes that all years were contributed in Spain and an amount of pension will drop out of this calculation.

 Hope this helps

biorb

thanks. We are still in Spain working so any 15 years rule would not apply to us. Not sure if we would be in the UK or Spain when time comes in 5 years to claim. Which would mean another 5 years paying into the Spanish system.

pinnks

I see - and claiming your UK pension via the Spanish authority... 

biorb

pinnks said:

I see - and claiming your UK pension via the Spanish authority... 

Undecided at moment.

Suhusa

Regardless of the rules around two state pensions, buying extra years for the UK pension is always a bargain. Class 2 benefits (the ~165 pounds) will pay themselves back in less than a year of drawing state pension, and Class 3s (~825 pounds) will be back in your account after about 3 years of pension payments, plus a couple of additional months to account for fees to exchange euros into pounds and vice versa. So unless your health is bad enough that you don't expect to live to reach state pension age, it will make sense to buy those years.