Query re contributions to non-UK state pension scheme

CarterUSM

Hi

My wife and I have both been employed in a civilian capacity by the Ministry of Defence in Cyprus since 2004. My wife has been subject to UK taxation and NICs for the whole of her posting.

My situation is somewhat different, in that my employment status in the MOD is that of a ‘dependant’, and as such, my income is subject to Cyprus taxation and the NIC equivalent.

We will be retiring and returning to the UK this coming summer, and whilst my wife’s situation regarding her state pension benefits is straightforward, I require clarification as to my own state benefits.

I have been paying into the Cyprus Social Insurance and Social Cohesion funds for the whole of my 21 years’ service with the MOD in Cyprus. I have been informed by my personnel office that my Social Insurance contributions will be transferred to the UK state pension scheme and count towards my UK state pension, as there is an agreement between the Cyprus and UK governments.

Could you please confirm that this is correct, and if so, the nature and the calculation basis of the additional benefits that this will secure?

There is a potential issue in that my State Pension forecast states that I only need to make 3 years’ additional NICs to ensure that I receive my full state pension in 2029 (my current estimated state pension is £203.40 per week, compared to the full amount of £221.20).

I am concerned that if the contributions (or equivalent benefits) I am entitled to from the Cyprus state scheme are transferred to the UK state pension scheme, I will effectively lose out on these benefits as I am so close to the maximum state pension threshold already. Is there any way in which this situation could be averted; for example, is there an option to retain these benefits in the Cyprus state scheme, or could they be capitalised and transferred as a lump sum to a private pension arrangement in the UK?

Very many thanks in anticipation of your assistance.

Bostonerimus1

You'll have to look at the UK Cyprus Bilateral Social Security Agreement. Often these agreements allow you to use contributions in one country to be added to contributions in the other to qualify for a pension if you don't have enough contributions, but the pension amount is then calculated only on the contributions you made to the system. Here is the wording in the UK Cyprus agreement.

Old age pension and widow’s pension

When an employed person insured under both, the Cyprus Social Insurance Scheme and the Social Insurance Scheme of the United Kingdom, is entitled to receive pension under both schemes, he receives a separate pension from each Scheme.

When an insured person is not entitled to two separate pensions, the country from which the insured person does not have entitlement to a separate pension aggregates the contributions he paid to the other country for the purpose of establishing entitlement to a pension. The amount of pension paid to the beneficiary after the aggregation, corresponds to his period of insurance in each country without one pension having any effect on the other.

The provisions mentioned above apply also in the case of widow’s pension.

I would ask your question on UK/Cyprus expat forums and also contact the Cypriot authorities about how much you'll get and how/if it can be paid in the UK.

pinnks

Cyprus is in the EU, so the EU regulations on coordination of social security systems continue to apply to those with periods of contribution in both countries before the end of transition.  Article 32 of the Withdrawal Agreement if memory serves.  

Anyway, so far as you already have more than 10 UK years, the EU rules add nothing but if you have fewer than 10 UK years, then years in other EU countries can be used to get you past the magic 10.  Either way, your UK pension will be based simply on however many UK years you have.

The rules also apply to Cyprus, so they too will do the 2 required calculations:
1. a pension based solely on your domestic record in Cyprus, so NIL if you do not have sufficient years

2. a theoretical amount of pension on the assumption that all of your contributions periods, that do not overlap, we made in Cyprus.  Where UK periods overlap with Cyprus periods, the UK periods are disregarded in favour of the domestic ones (this is aggregation).  The resulting theoretical amount of pension is then pro-rated, based on your actual Cyprus record.

You will therefore get a pension from the UK and one from Cyprus.    

DRS1

There is a potential issue in that my State Pension forecast states that I only need to make 3 years’ additional NICs to ensure that I receive my full state pension in 2029 (my current estimated state pension is £203.40 per week, compared to the full amount of £221.20).

How did you get so much UK state pension if you have not been paying NICs for the last 20 years?  You may want to check your NI record and see what it says for the years you have been in Cyprus.