UK State Pension Opportunity

Significant Opportunity for those who have worked in the UK

There are very few investment recommendations that financial advisers can make to clients that are a gold-plated opportunity to guarantee them income for life in retirement from an A-rated guarantor for a minimal outlay.

Written by Kieran Moore QFA, SIA, Director,Moore Wealth Management Ltd

Moore Wealth Management has been advising the Irish Pharmacy Community for over 20 years with extensive knowledge of the sector. They can be contacted at 086-3801868, kieran@mwm.ie or www.mwm.ie option allows you to buy back to 2006 or an additional 16 years.

Example

Take John who has 5 years of National Insurance Contributions and now lives in Ireland. As he is currently under the 10 years minimum requirement he has no pension. However he can buy back 5 years to give him the minimum rate pension. This would cost 5 * £163.80 = £819.

He now has the minimum requirement and will receive a pension at retirement age of the following

What to do now?

However, the option to buy a UK State Pension currently exists for anyone who has worked in the UK. We find this criteria is met by many of our pharmacy clients. Owing to the overwhelming amount of interest in this matter we have put the following Q&A together to show you if you can avail of this opportunity.

Who is eligible for a UK State Pension?

To qualify for the minimum UK state pension entitlement you must have 10 years on your national insurance record. This is the UK equivalent of our PRSI contributions. To qualify for the full UK state pension, you need up to 35 years.

What if I don’t have 10 Years of Contributions?

Even if you haven’t worked the required amount of time to reach the minimum 10 years on your UK National Insurance record, you now have the option to make voluntary contributions to increase your record to either bring you up the minimum requirement or to increase your record to bring you closer to the 35 years required for the full state pension.

Do you Need to be UK Resident No, You do not need to be a resident of the UK to avail of the voluntary contributions scheme. Normally you can pay voluntary contributions for the past 6 years with the deadline being the 5th of April each year but the current

Non-residents importantly have the option of paying Class 2 voluntary contributions which are at a much lower cost than UK residents are required to pay. It must be noted, that Class 2 stamps only allow for state pension entitlement and not other benefits like fuel allowance or spouses pension.

Can I claim both the UK and Irish State Pensions?

Yes, you can be paid both the UK and Irish state pensions if you qualify for both based on your respective social insurance record in each country.

What is the rate of payment in the UK

The maximum rate of state pension payment in the UK is £185.15 per week, for this you need 35 qualifying years on your national insurance record. So someone with 10 qualifying years will qualify for:

10/35ths x £185.15 = £52.90 per week

Cost to Buy Back Years

Buying back years under current offer

• £163.80 per year for Class 2 (Non-Resident) - 99% of you will be in this category

• £824.20 per year for Class 3 (Resident)

10/35ths x £185.15 = £52.90 per week or £2,750 per annum for a once off cost of £819 and this is paid until death*

He can of course also buy back additional years to increase this.

*The accuracy of this calculation will be slightly impacted by an overlap in calculations for pre and post-2016 as the number of years needed for the full pension changed from 30 to 35 this year. This would have to be factored in depending on when you were in the UK but the impact will be minimal.

Timeframe

There is a window of opportunity between now and July 31st this year where you can increase your pension entitlement at retirement age by topping up your contributions. There are several supports available from the UK Government so you can assess your entitlement here. https://www. gov.uk/check-state-pension

What is this worth

To buy an income for life equivalent to the minimum UK Pension of £2,750 would cost circa £55,000 on current annuity(income for life) rates. To buy the full amount would cost closer to £235,000.

Our advice is to send in the CF83 Application form to buy back years from abroad. If you are entitled they will tell you and crucially if it’s in on time you will have the option to buy back years to 2006 at Class 2 (nonresident) rates. Make sure this is sent recorded or tracked post and verify arrival. This is too valuable to leave in the hands of the Royal Mail. If you are unsure about any of this contact Moore Wealth Management on the details below for a full pack and brochure on this including all the required forms.

Advice

If you are lucky enough to qualify, this will have a significant impact on your financial planning. Your adviser will need to update financial projections and your cashflow model to factor this in. This will almost certainly have an impact on your current investment allocations as you may be able to de-risk some of your portfolios once you know you have this income guaranteed. Alternatively, with the security of this income you could move into a more riskon scenario.

This opportunity has highlighted for many that they have no proper financial plan in place and that advice to date consisted of collecting financial products with no goal. Your retirement needs a plan mapped out with full cashflow modeling. Anything else is not at the level of the best advice in today’s adviser market.

Deadline

This temporary arrangement to top up your entitlement ends on the 31st July and was recently extended from April 6th due to demand. Recent reports have indicated that there is a 25-week wait time for applications to be processed.