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Your All-Important Guide to Pensions in the UK if You are an Expat

Your All-Important Guide to Pensions in the UK if You are an Expat

pension guide

If you are an expat and you work and live in the United Kingdom, you may understandably have some concerns or questions regarding how pensions work in the country. The pension system can be quite complicated for beginners, and if you don’t know what to expect, you could have some difficulties down the line.  But the good news is that the UK has one of the best pension systems in the world, and despite its ranking having gone down in recent years, it is still quite a fair system which is designed to benefit many. Here, then, is your all-important guide to pensions in the UK if you are an expat.

The System: How It Works

The government of the UK has its own state pension, and this is where those working in the UK can make contributions to National Insurance (NI). These contributions are based on what you earn, and you make regular contributions to this so that it can fund your retirement. You can begin claiming the pension from the state when you reach the proper age for the state pension. But apart from the state pension, you can add to the amount of pension you receive when you retire with private pensions or workplace pensions. For a workplace pension, your employer will be the one to set up an automatic contribution system, and this has been a requirement for employers since 2017. You have the choice, however, to opt out of this scheme if you so prefer. 

Your Eligibility for a UK Pension

Of course, in order to be eligible for a pension in the country, you would have to reside as well as work in the United Kingdom, and you should have your own NI number as well. As a foreign national or expat, you will have to apply for your NI number as soon as you enter the UK. Additionally, you also have to pay contributions to NI for around ten years before you can qualify for the state pension. 

Bear in mind that NI will only be taken from your salary if you earn more than a prescribed threshold. If your income isn’t that high, you can still make voluntary contributions, however, so you can be sure of getting your state pension.

The Pension Age

In the UK, as of November 2018, the pension age is set at 65 for both women and men. But in October of 2020, the pension age is set to increase to 66, and it will also rise to 67 in the year 2028. Between the years 2037 to 2039, the pension age is predicted to rise to 68.

Here’s another thing to bear in mind: the default pension age due to forced retirement does not exist any longer, which means that you can work without any limits whilst you are still able. If you decide to work past the pension age, you can choose to defer the payments for your state pension, and this will give you an increase in your entitlement. If you opt to have an additional workplace or private pension, you can access your funds earlier than the state pension age; this will depend on the provider, of course, but generally, you can take out funds from as young as 55 years old.  One of the foremost things you can do for yourself is to find out more about how the pension system works – especially if you are thinking of getting a private pension; information on pensions for expats is readily available, and this can definitely work to your advantage if you’re serious about making sure you are comfortable in your old age.

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