In Australia since 1980 - 4 Years UK NI contributions pre 1980 - Buy class 2 NI credits from 2006?

ckxion

I have spoken to HMRC. This is what I understood about 4 years UK NI contributions pre 1980 and buying Class 2 NI contributions form 2006 to 2024/25

Having worked 40+ years in Australia they should both get full Australia pension.

Minor Question
This is my understanding from talking to HMRC
4 years NI Contributions from 1976 to 1980 will not count toward Australia pension as the mutual agreement between UK and Australia only applies to those who reached pensionable age before March 2001.

But that is not what I read online and believe those years would be counted towards Australia pension.

In any case, when they call UK pensions to claim a UK pension (or fill in the online form)  and give their Australia TFN, HMRC will check with Australian Government's Department of Human Services to confirm how those 4 years count.

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Major Question
It seems much more certain that, irrespective of what happens to the 4 years NI contributions they are eligible to buy UK Class 2 NI contributions from 2006 to 2024/25 thus will get a UK pension (clearly not the full amount).

Assuming I am correct, is there a way to be certain that spending money on buying UK Class 2 NI contributions will result in a UK pension - preferably in writing from HMRC.

My reason for doubt is Martin's warning on a related matter. HMRC will allow people (solely resident in UK) to buy years, but they might not have needed to buy these because of years spent at home raising children. Thus wasted money.

Any comments, feedback or corrections welcome.

molerat

Social Security abroad: NI38 - GOV.UK

Martin's advice is aimed at a UK audience so not really tailored for these different scenarios.

The basics are that if you were working immediately prior to leaving the UK you will be entitled to pay class 2 contributions for any week you were working overseas otherwise you would be able to pay class 3 and build up a UK pension.  Be aware though that, due to living in Australia, once in payment it will not increase annually - not a worry if only paying around £170 for a year though.

FIREDreamer

Isn’t the Australian pension means tested? Is there a chance they get nothing or a lot less than expected?

ckxion

FIREDreamer said:

Isn’t the Australian pension means tested? Is there a chance they get nothing or a lot less than expected?

You could be correct, I possibly assumed incorrectly 

pinnks

This Explanatory Note to some UK regulations The Social Security (Application of Reciprocal Agreements with Australia, Canada and New Zealand) (EEA States and Switzerland) Regulations 2015 makes that clear that provisions in the old agreement continue to apply for UK folk who were resident in AUS when the agreement was terminated:

"The Australia Order was terminated in 2001 with savings, and continues to have effect by virtue of section 299 of the Pensions Act 2004 to a limited extent. The effect is that only those who retired before it was terminated, or who were resident in the Australia before it was terminated can rely on the Australia Order."

S299 Pensions Act 2004 

Quite how those 4 UK years would impact any claim in AUS if you otherwise have 40+ years remains to be seen... I would suggest a chat with the AUS Pension Authority on that one, and a chat with DWP International Pension Centre to get the UK perspective on the position up to 2001 (the grandfathering provisions in S299 continue to apply the agreement for periods before it was terminated.  

The may, or may not, qualify to pay Class 2 NI abroad, as opposed to Class 3. The 2 criteria to open the door for Class 2 are that a person worked in the UK until immediately before they left and worked abroad for any week they wish to pay at Class 2.  If the first criterion is not met the Class 2 door is permanently shut but if it is met, then each week is viewed on its merits, which can mean a mix of Class 2 and 3 for any year.  You would need to send form CF83 to HMRC without delay to ensure it is logged onto their systems before 5 April 2025, otherwise all years before 2019/20 go out of date and can no longer be paid.  But remember that any UK state pension will be frozen and not increased annually by inflation, so whether paying to increase it is a good investment comes down to the mathematics...

It seems to me that you need to send the CF83 asap and then have those chats with the two pension authorities to work out the best way forward.       

ckxion

ckxion said:

FIREDreamer said:

Isn’t the Australian pension means tested? Is there a chance they get nothing or a lot less than expected?

You could be correct, I possibly assumed incorrectly 

Update. Australia pension is means tested. They reduce pension by 25% for a couple and $50 for a single person (including widow /  widower) against the UK pension.

As most people in Australia buying UK NI credits will be buying at the Class 2 rate it is still very worthwhile. Payback period is at most 1 year for every year bought - even with the reduction to Australia pension