UK state pensions
The good news for UK pensioners is that on 6 April, the beginning of the new tax year, the state pension is being increased by 10.1%
Peter Sanderson
Friday, 24 March 2023, 11:50
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Peter Sanderson
Friday, 24 March 2023, 11:50
As we approach the end of the UK tax year on 5 April there are financial considerations that have to be taken into account. At the top of the list is always the state pension with the reminder that any gap in your contribution record ... should be made up since, with the passing of each year, you lose the right to catch up with years where contributions have been missed.
The good news for UK pensioners is that on 6 April, the beginning of the new tax year, the state pension is being increased by 10.1%.
In the current tax year the state pension is 185 pounds per week which is 9,627 pounds per year. The increase of 10.1% means that for the first time a full state pension will be in excess of 10,000 pounds. In order to receive a full pension, National Insurance contributions must be paid in respect of 35 years and the minimum number of years that has to be paid to receive any pension is 10 years.
Pension years could have been missed due to an oversight or time spent working abroad. This year catching up costs 824 pounds for years that have been missed and you can normally do this in respect of the previous six years. Occasionally it is possible to pay for years beyond that and you are currently able to pay in respect of 10 more years. Until 31 July you can pay the arrears as far back as the tax year 2006-2007. After then the catch-up period reverts to the usual six years.
The importance of catching up with missing years can be easily illustrated. A full pension of 9,627 pounds per year is paid to those who have contributed for the maximum number of years, namely 35. This then translates into receiving 275 pounds for each year paid up. In the current tax year any missing year that is recovered costs 824 pounds so the return in the form of additional pension in respect of any year which has been caught up is 33%. There is nothing anywhere in the current economic climate that will deliver a return of 33% each year for the rest of your life. This should therefore be the priority of every UK expatriate who does not have an up-to-date National Insurance contribution record.
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