Voluntary 3 NI contributions from abroad and European pension aggregation

barcelonadude1

Hi Pinnks, thanks so much for all your help once more. I think if I remember it say just over 200 quid a week, 204 or something like that so I guess that would be the 31 years I'm forecast. Only have the 3 years I was at uni right now!

Yeah, I did the whole CF83 and have a deadline of August 25th to pay! Only bad thing is they're all at class 3 so will cost me about 15 grand for 06/07-18/19 which is a royal pain but I guess when I get to 67/68 I'll be glad I bit the bullet lol, then can pay the rest yearly to get me to 35 and then stop. Does that make sense??

Also, can I just clarify, the 9 or so non-overlapping years I would have in this scenario before I started working in Spain in July 2012 (2003-2012) can be used to aggregate me towards my Spanish pension right?

Again appreciate all your help and Dazed/Confused, Qriz B also!

pinnks

OK, so, you have 3 years currently and will indeed need a total of 35 to get a full pension.  If I understand correctly, you could pay 2006/07 to 2024/25 (19 years) plus 28 more before you reach what for you is currently your pension age.  So, you need to pay 32 more years out of a possible 47.  Which ones you choose to pay is up to you but they should all add the same amount to your weekly forecast.

Class 3 sounds correct as you were not working before you left the UK, so it comes down to a question of finances and personal choice I guess as to which years to pay now - non-overlapping UK years would seem sensible but as to the others... 

The earlier you pay, the cheaper the overall cost but 19 years now at Class 3 is a lot of money.  2019/20 onwards are of course still open, even after your deadline but the price will increase to £923 for most of those years.  2019/20 goes out of date next April, and so on.

Re aggregation you are correct.  The UK actually works on weeks for NI purposes, though we count years for our pension rules.  Spain works on days, so they will merge your UK calendar weeks (not UK tax years) into their calendar days to create a non-overlapping aggregated record, starting with the first week of your first UK year, and ending when you claim your Spanish pension.  As long as that record has more than 15 calendar years and at least 2 of the final 15 years are contribution years, you will get a Spanish pension, based on your Spanish record.  So, while those early UK years will help, they may, or may not, be relevant when the calculations are done if you otherwise meet the Spanish requirements.  That said, if you cannot afford to pay all 19 available years now, paying those that will help with aggregation would seem sensible as opposed to paying those that won't help in that regard.

barcelonadude1

Thanks again for all your help! Do you mind if I get your insight on a few follow up questions?

- So I know its ultimately up to me, but if you were in my shoes would you pay up if you could afford it and just get to the 35 UK years asap? I'm guessing its better to have a full UK pension for example and lets say 75% of a Spanish one rather than just one pension through aggregation (I know there would be 2 separate pensions in the aggregation scenario too but effectively it would add up to one right?)
- Again in the scenario of me having say 75% of a Spanish pension, do the non-overlapping years help me to get more of a Spanish pension than I have acheived or would it not apply as I would have well over the 15 years minimum?
Cheers and sorry for all the hassle!

pinnks

You will get 2 pensions come what may.  Paying UK voluntary NI just means your UK pension is way bigger than it would otherwise be, and your Spanish one not less than it would have been.  

I would pay as many back years as possible as soon as possible, subject to my finances but then perhaps delay paying future years until just before the price increase, so 12 months in arrears for Class 2 or 24 months in arrears for Class 3.  But that assumes my health remained good etc.  But all of that is subject to other calls on the finances, of course.

Absent paying overlapping UK voluntary periods you would, in essence, get X% of a UK pension plus Y% of a Spanish pension.  But if you pay those UK years you get X+ Z% of a UK pension but still get Y% of the Spanish so overall simply more money in retirement.

As to your second pension, aggregation generally does not to add to the amount but gets you past any minimum period requirements.  It's mandatory for Spain to do it and it can't reduce your pension, only give the same amount or more.

That said, in some countries the way their pension rules work, you can get more under aggregation even if you already meet the minimum requirements.  Germany is one such country and I don't fully understand the maths but I think it relates to periods during which you would have got contribution credits in one or other country.

For me with School/uni/work in Germany/work in UK/claim pension, aggregation just gets me past the 35 years' requirement to claim the pension at 63. For my wife, and a few others I know, with a more chequered history and periods of adult re-training and unemployment and caring for kids etc, the aggregation calculation can give 10 to 20% more pension.  It is what it is.  I think this is in part because the German pension system is earnings-related, as is Spain's, but whether Spain's rules work similarly to those in Germany is not known.  I would not bank on it and if a higher number pops out of the calculations, just take it as a windfall...     

barcelonadude1

Hey again, yeah thats what I'm planning to do, take the hit now for the past years in a lump sum and then pay the other going forward just before the deadline so I get the cheaper rates and then stop when I hit 35 lol. Can I ask your personal opinion if this is a decent investment as opposed to private pensions or putting the money into the market? I know the state pension isn't an 'investment' as such but I've heard as you break even on it after about 3 years of claiming it and also because its for life and inflation proof its a good deal, even on class 3?

pinnks

Others can comment better than I can on the private pension point but yes, payback is about 2.75 years (pre-tax) in today's terms but by the time you get the pension it will be a lot less than that because the pension will have increased with inflation in the meantime.  I guess you could make the maths as comprehensive as you like but in simple terms for me, I paid 5 years and my actual payback, assuming next year's pension rise is 2.5% (likely to be higher than that), is 2 years and 5 weeks pre tax.