UK Budget closes expat state pension contribution loophole

The UK Budget, presented by Chancellor Rachel Reeves on Wednesday this week, has closed a generous loophole for working-age people who move from Britain to live abroad.

People who have worked in the UK can continue to pay in voluntary contributions from abroad towards getting a British state pension when they retire. For those topping up to a complete 35 years, full UK pension entitlement, currently 230 pounds (262 euros) a week, can be possible.

However from next April, the minimum number of years a person has to be resident or paying contributions in the UK initially to be eligible will rise from three to ten years. The current system was seen as over generous to people leaving the UK, said the Budget statement.

In addition, the option for self-employed people who leave the UK to keep paying cheaper voluntary contributions (known as Class 2) will be abolished and every expat topping up their UK state pension from abroad will pay the more common and much higher Class 3 level.

The changes do not affect the separate, bilateral agreement between the UK and Spain where workers in Spain who have worked in the UK as well can potentially combine years worked in both countries to boost their state pension level on retirement.