Voluntary 3 NI contributions from abroad and European pension aggregation

barcelonadude1

Hey all

I'm sure I've probably totally misunderstood how aggregation works but if anyone in the know could advise on my hypothetical future situation I'd really appreciate it!

I am projected to have full 35 UK years through paying voluntary NI contributions from abroad , but 8 or 9 of these will be non-overlapping years at the beginning (2003-2012). I started working in Spain in 2012.

Can these early UK years then be used in Spain to help me if I didn't quite meet the Spanish requirements for their pension or does it not work like that? I wasn't quite sure if it aggregation only came into play if you were under the minimum amount in one or both countries (10 in the UK and 15 in Spain).

Thanks so much!

pinnks

You will get a pension from each country based on your record in that country.  Nothing is transferred or lost.

You apply for your pensions via the pension authority in your country of residence, or, if you do not have a contribution record in that country, you apply where you last contributed. That country then collates all of your records from each country in which you have lived and shares the total records with each of those countries and passes your claim to them. i.e. they do all of the legwork for you!

The regulations then require each country to do 2 calculations and to pay you the higher amount as your pension:

1. a pension based solely on your domestic record in that country, so nil if you do not meet minimum requirements like the UK's 10 years or Spain's 15 years and 2 years in the final 15 being contribution years.
2. a "theoretical amount" of pension, based on the assumption that all of your record was contributed in that country, so domestic and foreign records combined. This is aggregation and in merging your records any foreign periods that overlap with domestic periods (UK weeks and Spanish days in your case) are disregarded in favour of the domestic periods.  This helps you meet those minimum period requirements and a number greater than zero will drop out if you do then meet them.  This "theoretical amount" of pension is then pro-rated, based on the ratio of your domestic periods to the total aggregated period.

The way this works with the UK rules is that as soon as you have 10 UK years you can ignore the rules as 1 and 2 above always give the same amount, but if you have fewer than 10 UK years, you just ignore the 10-year requirement (assuming your foreign years get you past that 10) and calculate a UK pension based on your fewer than 10 years.

For countries like Spain and Germany that have an earnings-related pension, the maths is not so straightforward but as long as your UK and foreign days/weeks/months/years, depending on what the other country uses as the basis for its calculations, get you past the minimum requirements a pension of more than zero drops out at the bottom.

Aggregation can also help you meet the requirements to take your pension early in Spain, with (currently) something like 38 years and 3 months of aggregated records.  

barcelonadude1

Hi Pinkks, thank you so much for your reply. That's actually a much clearer explanation than I've been able to find online. But just confirm though, am I right in saying only non-overlapping years can be used to aggregate? So I know you won't be penalised for paying into two social security systems concurrently, but for the aggregation only the voluntary NI contributions I make for the years before I started working in Span will count? Thanks again!

pinnks

You are broadly correct but you don't think of it in terms of UK years.  Spain's system is based on days, so they have a record of how many days of contributions you have in their system from age 16 onwards.  UK NI is a weekly charge based on our unique tax year, so your UK record shows a number of weeks with dates attached, from the tax year in which you turned 16.  Some tax years may not be full for UK pension purposes but may have some full weeks that will feed into aggregation.

If you think of the aggregation process as a spreadsheet with 4 columns it might help.

• Days
• Spanish record of contributed and not-contributed days
• UK record of contributed and not-contributed weeks (7-day packets)
• Aggregated total using all of the Spanish column plus data from the UK column if there is no data in the Spanish column for that day

So, if you have a continuous Spanish record since arriving then you are correct that UK voluntary years won't count but if, for some reason you have gaps in your Spanish record and have paid UK NI coving part, or all, of those gaps, then the UK weeks will count in aggregation.  Note also, that those few weeks NI you paid with those summer jobs as a student, or whatever, after the age of 18 when your juvenile credits ended, will also feed into aggregation as Spain is not based on full qualifying years like the UK system.  

barcelonadude1

Sounds good! Can I just get your opinion real quick then if it would be worth me paying voluntary NI contributions to get the full 35 years for the UK state pension. So eventually I would have paid up:

2003-2038 Full UK pension, 35 years
July 2012 onwards - working full-time in Spain

Anything else I need to consider?

Thanks again for your insight!

QrizB

barcelonadude1 said:

Anything else I need to consider?

Have you checked your UK state pension forecast?

You might need more than 35 years, or fewer.

https://www.gov.uk/check-state-pension

barcelonadude1

QrizB said:

Cheers, yeah I'm 40 years old with only 3 years of contributions so far so guess I will need at least 35 for full SP lol. Will re-check the forecast (thanks for the link) but I guess in my situ would be worth paying, no?

pinnks

No downsides and yes, you would get a full UK pension if you have sufficient years and a pension from Spain based on your record there with aggregation helping you meet the 15 year requirements.

If you currently have only 3 UK years then it seems like that 35 years will get you a full pension but as has been said, it would be best to get a pension forecast to see exactly how many more years you will need.
 

barcelonadude1

Hey all, did the pension forecast. Its just telling me I can pay another 28 years to get to 31 if I pay as I go along now until retirement, but I do have the option to pay the most recent years right now voluntarily up until 2019 with this extended deadline that's been put in place (these years will be slightly cheaper) and then I can pay the rest as I go until I hit 35 years. Can I ask in your opinion if you would do this if you were in my shoes and could afford it?

Dazed_and_C0nfused

barcelonadude1 said:

Hey all, did the pension forecast. Its just telling me I can pay another 28 years to get to 31 if I pay as I go along now until retirement, but I do have the option to pay the most recent years right now voluntarily up until 2019 with this extended deadline that's been put in place (these years will be slightly cheaper) and then I can pay the rest as I go until I hit 35 years. Can I ask in your opinion if you would do this if you were in my shoes and could afford it?

It's not what you can pay that is important, it's what you need to pay to reach your personal maximum (£230.25/week at the moment).

pinnks

barcelonadude1 said:

Hey all, did the pension forecast. Its just telling me I can pay another 28 years to get to 31 if I pay as I go along now until retirement, but I do have the option to pay the most recent years right now voluntarily up until 2019 with this extended deadline that's been put in place (these years will be slightly cheaper) and then I can pay the rest as I go until I hit 35 years. Can I ask in your opinion if you would do this if you were in my shoes and could afford it?

How much does it say you will get if you pay 28 more years and how many years does it say you have now?  From that you will be able to work out how many years you need in total to get the maximum.

If you started the process of applying to pay voluntarily from abroad before 6 April 2025, and/or requested a call back from DWP before that date, then years back to 2006/07 remain open so far as they have not yet been paid.  Otherwise it's only 2019/20 onwards.

But either way you need to send form CF83 to HMRC and wait their response re Class 2 or 3 rates to make progress.  This does not commit you to paying anything.