UK State Pensions 5

Finally the end is in sight

Picture

My online forecast from a couple of days ago

We’ve written about the UK state pension before (apologies, non-British people! This should be the last of these posts), but the sheer incompetence and disorganization at HMRC means this series has grown to five posts. It should have been one or two at most…

UK State Pensions
UK State Pensions 2
UK State Pensions 3
UK State Pensions 4

Here are the most important points:

  1. Overseas residents can pay into the UK state pension on a voluntary basis
  2. At present, this is a great deal: the contributions are quite low, and the projected payouts are relatively good (cheaper and more generous than nenkin in Japan)
  3. If you have paid into the pension in the UK in the past and you act quickly, you may be able to pay the much cheaper Class 2 contributions (these are due to be phased out soon). The normal Class 3, while more expensive, are still a good deal.
  4. The UK civil service in general, and HMRC in particular, are completely overwhelmed (possibly due to the impending Brexit) so trying to communicate with them and get them to do relatively normal things like take your money can be difficult and frustrating.
  5. If you have the patience to see the process through to the end, contributing to the UK state pension is currently a great deal, is a good way to diversify your investments, and will provide you with a cheap annuity.

* There is some degree of political risk in this, as there is no guarantee future governments will not change the way the pension works. Currently if you are living in Japan the amount of the UK pension will be set when you become eligible to receive it, so it will not increase with inflation. Even with these caveats I think this is a good idea for most people.

In the fourth post I had just managed to set up a Direct Debit from my UK account to pay voluntary Class 3 contributions going forward.

Next I looked at backpaying. I asked HMRC to confirm how much I would be allowed to backpay and they sent me a standard letter saying I could backpay eleven years, with a table listing the amount due for each year. The payment instructions seemed vague, and I really didn’t want to make a mistake, so I asked them to clarify exactly how much I should pay and how.

So of course they sent me the exact same letter again. Hmm. Nine weeks wasted.

I looked through all the information again, took a deep breath, and transferred 7620.60 GBP to the HMRC account on March 5th.

I then waited for the contributions to show up in my online pension statement.

And waited.

And waited.

And waited some more.

Finally I called them last week. After being passed around a bit (the normal helpline doesn’t deal with overseas residents, but they were able to transfer me to the people that do) I spoke to someone who confirmed that they had received my money in March.

Phew. When was it going to show up in my account? I asked.

They then asked me what years the money was for. I dug out the letter they had sent me twice, told them, then they said they would get it assigned to the record properly.

Two days ago I logged in and saw the screenshot at the top of this post: I have now contributed enough to get a UK pension, and if I continue contributing on a voluntary basis until I have paid the remaining 21 years I will get the full amount.

The mind boggles though. What would have happened to my money if I hadn’t called them? Would it have just sat in the HMRC account until they lost the record of what it was?

This whole process has taken about eighteen months, for something that would have taken about twenty minutes in Japan. Sometimes you have to deal with the UK civil service to understand just how good we have it in some ways here.

So there you have it, the full UK state pension saga. Now I just have to remember to cancel the direct debit once I reach the full 35 years of contributions in 2039 or so!

How about you? Anyone else backpay the UK state pension? Did you have an easier time of it than I did?

22 Responses

  1. I’m having similar problems…. I set up to pay the cheap class 2 contributions and have been trying to pay two year every year. Recently I logged on and my record had been changed to class 3’s with no explanation. The payment I made last month has not showed up yet…Frustrating.
    Trying to pay as many as possible before class 2’s are abolished next year. I agree that everything seems vague. For example, they say that you should use a reference number when you pay by internet, however they don’t include the reference on the payment request slips.

    1. I recommend calling them (Skype is a cheap way to do this). Trying to do anything by letter is almost impossible, and I don’t have an email or online contact address for them…
      Good luck!

  2. I would love to do that for the French pension to get some complementary pension when I get old…
    I wonder if this also works for France!

  3. I backpaid about 9 years ago. At that time one years class 3 contributions were less that £350 a year. Cheap. I backpaid about 9 years and now pay it once a year via a cheque. Having the government gateway account works well also and I would recommend it. My forecast is the same as yours.

  4. I have also back paid and pay class 3 every month by direct debit. It is definitely peace of mind for me and getting both that and the J one is quite a nice prospect. Hope I live long enough to make it worth while!

    1. Great stuff. Of course, unless we know when we are going to die, the real benefit is the peace of mind 🙂

  5. I’ve been paying by cheque for years. I get the bill in May and they always send a receipt to my Japanese address months later. Now I know I can check my statement online I’m very happy. Thanks!

  6. Having read your previous posts towards the end of 2017, I sent off my CF83 form to apply for class 2 in January 2018. Had a vague response in May 2018 saying, “Unfortunately, you do not meet the conditions to pay voluntary National Insurance contributions abroad as your UK National Insurance record is too sparse prior to you leaving the UK.” I called up today to find out what that meant, if that means just no to class 2 or no to class 3 as well, but the person I spoke to was pretty unhelpful and just urged me to write another letter seeking clarification. So another 4 month wait for me then…

    1. Ugh, that is terrible. I had actually never paid into NI at all (I had three years of eligibility from being in full-time education) but am now paying Class 3 voluntary contributions so I would be surprised if you were completely ineligible…
      Do report back in September though 😉

  7. I have also recently paid several years of voluntary class 2 NICs, and set up a direct debit for future years. I did it all by letter but it did take about six months. Like you, it took several weeks for the contributions to appear online. I did ask them to write to me to confirm when it was done, but no letter yet.

  8. I came upon this by chance and am glad I did as it led me to check my pension statement online and get a nasty shock
    I’ve been paying class 2 for a few years and worked in the uk before coming to Japan.
    In 2015 I made 9 years of voluntary payment only to discover today that they haven’t been added to my account.
    Luckily I have a receipt from them and a copy of my bank transfer detailing the transaction.
    I have immediately sent off a letter and copy of the documentation so now I’ll just have to wait and wait.

    1. Glad to be of service! Hopefully it will turn out the same as me, ie they have the money and they know it’s yours but for some reason they haven’t done anything with it 😉
      Hope it all works out.

  9. Like a few other people who have left comments, I came across this by chance – many thanks for the post!
    2.5 months after sending in the CF83 form and covering letter, I’ve been cleared to make class 2 contributions. I received a letter the other day with a list of 12 years’ payments that I can back-pay. I haven’t done that yet, but looks fairly easy…
    I’d prepared myself for a long wait, so was actually pleasantly surprised to get things sorted out so quickly.
    Well worth doing. Cheers.

  10. Further to my comment above:
    I received a letter today from HMRC (oddly with a postmark from the Netherlands) in reply to the letter I sent in May querying the first letter they sent me. I am not eligible to pay either class 2 or class 3 contributions. Here’s what they said:
    “We have reviewed your National Insurance account, unfortunately we are unable to proceed with your application to pay voluntary class 2 or 3 National Insurance contributions.
    To pay Class 2 or 3 NICs you must satisfy both of the following conditions:
    – you have lived in the U.K. for a continuous 3-year period at any time before the period for which NICs are to be paid. (If you have lived or worked in another EEA country or in Turkey, time spent there might help you to meet this condition)
    – before you went abroad, you paid a set amount in NICs for 3 years or more
    As you have not paid 3 years National Insurance contributions before leaving the U.K. you cannot pay voluntary NICs while you are abroad.”
    I came to Japan a little under two years after finishing university so I only paid NICs for 21 months not 3 years before coming.
    Anyone else in the same boat? Anyone got any good advice on how to proceed?
    Thanks all in advance

    1. That is very strange. I have not paid *any* NICs, but they gave me credit for the time I was in secondary school and I was able to start making voluntary payments and backpayments.
      They may have started cracking down and making it harder for people to pay in, or you may have been unlucky and gotten someone who misunderstood the system.
      Do you have access to your online records? See how many years you have credited there and maybe give them a call to follow up…

      1. Thanks for your reply.
        I’ve just called up HMRC to query my letter. They tell me that in order to qualify to pay class 2 or class 3 contributions, you need to have three full years of contributions for the three years immediately before leaving the UK. Although I have five years worth in total, only two of them fall in the three years immediately before I left the UK. The year before that I was at uni and didn’t work.
        The chap I spoke to suggested writing another letter (!!) to ask if it’s possible to pay the missing contributions for those three years, in my case one missing year. He said that’s probably the only solution moving forward. So that’s what I’m going to do. Might hear back by Christmas!

      2. That must be a new rule because I don’t qualify under that requirement, yet here I am merrily paying in…
        Infuriating. I guess they are trying to narrow eligibility.

  12. FYI – My wait time for a response after submitting the paperwork was around 4 months. The online HMRC system now however does show the status of your query ( when my paperwork arrived, processing, and eventually the “we sent you a reply ” ). So at least you know that they’re doing something ( even if its slow ).