UK loophole allowing for massive potential expat pension windfall
The British Parliament’s Brexit chaos has delivered a massive potential retirement windfall for almost anyone who has worked legally in Britain for more than three years.
Expatriate Brits and even returned Australian pilgrims are urged to make the most of a continuing loophole that could deliver thousands of pounds of extra British State Pension each year on retirement.
The loophole means that someone who collects the State Pension for 15 years would get more than $6600 extra in return for a one-off payment of $270 this financial year.
The British Government has failed to close a pension purchase discount scheme set-up for low earners that has created the loophole for savvy expats.
The so-called Class 2 loophole lets people who have already qualified for a British pension buy extra pension entitlements at big discounts to the amount paid by millions of workers still in Britain and Northern Ireland.
It also provides a bargain-basement way for former workers in Britain to qualify for the pension even if they have not made the minimum 10 years of national insurance contributions necessary to get the basic weekly State Pension of £47 ($83) a week. If one contributes for 35 years, the full weekly amount would be $164.35.
A British resident would have to pay £762 ($1338) in the 2018-19 financial year to voluntarily boost their State Pension weekly entitlement by £4.74 ($8.32).
Whereas expatriate workers only need to pay £153 ($268) this financial year under Class 2 to enjoy the extra £4.74 a week.
Empire Financial Group financial planner Nicholas Hart, who specialises in British pensions, said people working in Australia should take advantage of the Class 2 contributions while they were still available.
Hart said it made a lot of sense for someone to buy themselves another £246 ($432) a year of pension by paying £153 once to the British Government. He said it’s what many people spend on a night out.
The British system allows people to pay up to six years of past contributions, meaning someone can still make back payments to the 2012-13 tax year.
And one will be able to make future contributions while the current rules stand, until the 35-year limit is reached.
The UK pension age is rising from 65 to 66 over the next two years and the Government aims to lift it to 68 within two decades.