UK pension

Understanding the UK pension system for expats

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Our complete guide to the UK pension system explains UK pension rules for expats, including UK pension rates, pension age and contributions to help calculate your average UK pension.

If you live and work in the UK, gaining a better understanding of your UK pension can help you plan a more secure retirement in the UK.  

The UK pension system has traditionally ranked high in the world but in the recent Melbourne Mercer Global Pensions Index, the UK dropped out of the top 10 to 11th place. However, much of this can be apportioned to recent reforms; the new UK pension rules since April 2016 include automatic enrolment for workplace pension schemes and a gradual increase in the legal UK pension age for both men and women.

The new UK pension is designed to provide sufficient income in retirement and ensure a decent quality of life for those planning a UK retirement. You should also consider if UK inheritance law and taxes apply to your assets and pension savings.

This UK pension guide explains:

UK pension rules: Who can claim a UK pension?

To first qualify for a UK pension you must have a UK National Insurance Number. For UK citizens this is issued before their 16th birthday, but foreign nationals will need to apply for one on entering the UK. Read more about obtaining an NI number

In addition to a valid NI number, the main UK pension rule is that residents living and working in the UK must have paid National Insurance contributions for at least 10 years. Be aware that you will only get NI benefits if you earn over a certain threshold, currently GBP 112 per week.

To receive the full UK pension, UK pension rules require a qualifying period of 35 years of contributions; if you contributed less than this amount, you’ll receive a pro-rata pension amount calculated on the UK pension contributions you made. This includes both employed and self-employed work periods, as well as periods in which you received certain National Insurance benefits, such as unemployment or maternity leave.  

Individuals can supplement their UK pension amount with UK workplace pensions and private pension investments. The former is typically via an automatic enrolment by your employer, meeting requirements that have been phased in since 2012 and due to be completed by all employers by 2017. Previously, employees could opt in to UK workplace pension schemes, but now they will have the choice to opt out instead. This option is available to anyone working and paying NICs in the UK, but different UK pension rules may apply to foreign nationals not intending to retire in the UK. 

Other notable UK pension rules include:

  • You can make voluntary National Insurance Contributions (NIC) to fill in the gaps in your National Insurance record to reach the required UK eligibility period.
  • For those who haven’t lived and worked in the UK continuously, the UK pension eligibility doesn't require 10 consecutive years. If you move abroad and return to the UK, you will still be able to draw a UK pension after 10 non-consecutive years.
  • Foreigners who have worked in other countries within the European Union can typically combine social security contributions made in any EU country towards calculating their UK pension eligibility; for example, if you worked in the UK for eight years but also in France for five years, you will be eligible to claim a pro-rata UK pension (see more examples). This UK pension rule could be revoked, however, depending on agreements made when the UK exits the EU.

UK pension rules

What is the UK pension age? 

The legal pension age in the UK is currently undergoing changes to steadily bring women’s retirement age in line with men. Originally for men born before 6th April 1945 and women born before the 6th April 1950, the UK pension age was 65 and 60 respectively. However, there is an additional phase whereby men born after 6th April 1945 and before 6th April 1951 will retire at 65, while women born after the 6th April 1950 and before 6th April 1953 will retire between 60 and 63 years old, depending on their date of birth.  

Currently, for men born after 6th April 1951 and women born after 6th April 1953, the legal UK pension age is 65 for men and 63 for women and the new state pension laws apply. However, the new UK pension age will gradually increase to 66 for men by 2018 and 65 for women by the end of 2018.

A 'defaultment UK pension age' (forced retirement) no longer exists, meaning you can work as long as you like. The option to defer your UK pension and continue working will increase your pension entitlement. In the UK you have to apply to claim your pension, so to defer you simply don’t put in your application for your UK pension.

You can find your UK pension age using the government's UK pension calculator or see a list of UK pension ages for the upcoming years. Read about the new UK pension conditions for more information.

Pension charges in the UK

Working UK residents must pay a percentage of their salary towards National Insurance Contributions, along with a percentage from employers, if they reach a certain income threshold. The current UK pension contributions for employees are 12 percent of primary and threshold earnings higher than GBP 155, and 13.8 percent for employers.

UK pension contributions (or NICs) are formed by different classes: 

  • Class 1 – all employees earnings more than GBP 155 per week must pay UK pension contributions.
  • Class 2 – self-employed individuals who earn less than GBP 5,695 per year; those under the threshold are exempt, but can make voluntary contributions.
  • Class 3 – voluntary contributions.
  • Class 4 – self-employed workers who earn more than GBP 8,060 per year.


The voluntary UK pension contributions, or top-up schemes, can help supplement your UK pension rate or fill in gaps in your NIC record. 

If you earn less than GBP 112, your National Insurance contributions will be paid for you.

UK pension rates

Those who qualify for a full UK pension can expect to receive about of GBP 155.65 per week; your final UK pension rate depends on your National Insurance record. This equals an average UK pension rate of GBP 8093.80 per year.

Your total UK pension contributions are calculated against a number of factors to create your UK pension rate. You can get an estimate of your UK pension rate here, as well as information on how to increase it. The government also offers a pension calculator to give you an overview of your UK pension rate incorporating a number of financial factors. Low-income earners or those on National Insurance Credits have their national insurance paid by the government to ensure there are no gaps in their National Insurance records. 

The new UK pension will be increasesd each year by whichever is higher:

  • earnings – based on the average percentage growth in wages
  • prices – based on the percentage of price growth, or the Consumer Prices Index (CPI)
  • 2.5 percent
  • Protected payments will increase in line with CPI each year.

If you work past retirement age, your UK pension rate will increase by 1 percent for every nine weeks you defer (around GBP 4.45 per week in 2016), or about 5.8 percent for each full year. The extra UK pension rate is paid alongside your regular UK pension amount; for example, if you were eligible to receive the full pension (GBP 155.65 per week or GBP 8093.80 per year), deferring for one year could earn you up to GBP 468 extra per year, or more accounting for annual increases.

If you continue working, you won't typically pay National Insurance after you reach the UK pension age (except for self-employed workers in Class 4). You will have to pay income tax, however, if your total income is more than your tax-free allowances (the amount of income you can have before paying tax).

UK pension calculator

The goverment supports several agencies that provide free advice and information on your UK pension entitlements, including UK pension calculator tools:

  • www.gov.uk – use their UK pension calculator, and read how to raise your UK pension rate.
  • www.ageuk.org.uk – besides a UK pension calculator, their guide helps you set up retirement goals and check if you're on track to achieving them.
  • europa.eu – residents who have worked in several EU countries can combine their collective years of employment to get a higher UK pension. The EU explains how the process works.

UK pension contributions – UK pension rates

UK pension eligibility for expats 

If you’re a foreign national living and working in the United Kingdom, it’s important to know what will happen in terms of your UK pension entitlement.   

All UK residents receive a personal National Insurance Number, which ensures that any contributions made into the UK state social security system are allocated and calculated against your UK pension eligibility. As an expat, providing you meet the qualifying period for contributions, you should be able to claim a UK pension on reaching the retirement age.

You can also take advantage of enrolling in occupational pension schemes (if you aren’t already part of the automatic enrolment) and private pension schemes. However, for these there may be different restrictions and taxes applied should you decide to move abroad. Tax rates will depend on bilateral agreements between the UK and the intended country of residence, which in some cases can result in having to pay tax both countries.  

You have two options with regards to your combined pension pot: You can leave your pension pot in the UK and withdraw it from abroad, or you can move your combined pensions abroad or a combination of both. It's important to seek advice, however, as the tax implication could reduce your pension entitlement.

For residents of EU and EEA member states, it is possible to combine state pensions from other member countries to enable you to qualify for a state pension in each country where you meet the criteria. To do this you need to apply to the pension office in the last country you worked in, where they will exchange information with other relevant EU members to calculate your pension allowance for each country. See an explanation of how this works.

There are similar agreements between the UK and Barbados, Bermuda, Canada, Chile, Israel, Jamaica, Jersey and Guernsey, Mauritius, New Zealand, the Philippines and the United States. This means that citizens from these countries residing in the UK can also draw state pensions from both countries, although it will be calculated pro-rata (based only on the years you worked in each country, hence typically a lower rate). 

UK pension transfer

There are different tax implications on your UK pension depending on where you reside. Even if you are a UK resident living abroad, you could still be liable to pay UK tax if you’re classed as a UK tax resident or if your new country of residence doesn’t have a bilateral agreement with the UK. In these instances, you may have to pay tax in both countries, although it is sometimes possible to claim tax reliefs.

Under the new UK state pension system, the pension rate is expected to be increased yearly in line with inflation rates if you live in the UK. However, these increases won’t apply if you leave the UK, unless you stay within the EEA, Switzerland or in one of the above countries that has a social security agreement with the UK (excluding New Zealand and Canada).

Transferring workplace or private pension schemes from or into the UK can be more complicated for expats, as there is not the same straightforward process that occurs with state pensions. If you intend on retiring outside of the UK, you may need to find alternative pension investment plans to access them or minimise taxation. Many UK pension providers won’t pay pensions into foreign bank accounts, so finding an alternative solution such as an overseas pension scheme like QROPS could be beneficial.  

Qualifying Recognised Overseas Pension Schemes or QROPS are a type of offshore pension plan that are approved by the HRMC. They allow pensioners to transfer personal and company pension funds to an offshore provider, while also avoiding double taxation and benefiting from lower inheritance tax and more flexibility in the amounts you can withdraw.  You can compare benefits to UK inheritance law and taxes.

Other options include QNUPs (Qualifying Non-UK Pension Schemes), which are pension funds that are widely available in many countries. Like QROPS they also offer various tax benefits, including mitigating inheritance and capital gains tax and provide greater flexibility for accessing your pension funds.

UK pension advice

The Pensions Advisory Service (TPAS) provides free UK pension advice to residents regarding their state, company and personal UK pensions, as well as helps those who have a problem with their occupational or private pension arrangement.

For UK pension advice, visit their website, phone 0300 123 1047 (or +44 20 3733 3495 from abroad), or book a free appointment to discuss your UK pension options via phone or face-to-face.

UK pension eligibility

The UK pension system 

The UK pension system was established in 1909 to help alleviate poverty in old age. Naturally over the past 100 years, it has evolved and developed to create an efficient and robust structure that aims to provide living allowances for the elderly in retirement.   

The main basis of the structure stems from the statutory UK pension, which is supplemented by UK workplace pensions and personal private pension investments to assist in providing greater income on reaching the UK pension age. 

UK old-age pension

The UK pension system is funded by National Insurance Contributions, which are paid by all working UK residents depening on their income. These payments are deducted from your salary by your employer and paid directly to the HMRC to go towards your UK pension or other National Insurance credits, such as unemployment benefit or maternity.

UK workplace pensions 

The second pillar of the UK pension system consists of occupational, company or workplace pension schemes, which are dependent on your employment. UK workplace pensions provided by employers used to be voluntary, however, in 2012 the government introduced the requirement for automatic enrolment into UK workplace pension schemes. This scheme should be fully integrated by 2017, where all UK employees will be automatically enrolled into an an obligatory workplace; employees, however, can choose to opt out.    

With UK workplace pensions, the employee and employer make contributions, which vary depending on the scheme available. Pension plans can be in the form of:

  • defined benefit schemes, which promise employees a fixed pension amount on retirement;
  • defined contribution schemes, which provide employees a sum of money to buy a pension on retirement, such as annuity that offers a guaranteed income for life.


The latter is deployed by most companies in the UK because it offers more tax benefits, as you make the contributions out of your gross income before tax is paid.  

UK private pensions and providers

The third pillar of the UK pension system is made up of private pensions, which can be taken out with your choice of UK pension provider or at most UK banks. Private pensions are designed to be additional subsidies for retirement income, and can be used to supply a guaranteed or regular income throughout retirement or taken as a lump sum withdrawal, which is 25 percent tax free in the UK.   

UK private pensions require individuals to make contributions, whether monthly or via a lump sum, and can offer various tax benefits and sometimes incorporate employer’s contributions too.

There are two main types of private UK pension funds: insured personal pension plans and self-invested personal pension plans (SIPPS). The former has a limited number of UK pension fund options, although most modern schemes still offer a great deal of choice; whereas the latter gives more freedom to choose what investments are made and when they are sold, which can give better returns from your UK pension fund.  

Claiming your UK pension 

It is always advisable to seek advice from a financial advisor or your local pensions office. As an expat it is prudent to seek advice in all countries where you have participated in pension schemes or consult an international advisor, to ensure you maximise the amount of pension income and avoid unnecessary tax penalties.  

When it comes to claiming your UK pension, all residents must personally instigate procedures with their local pension service, as the UK pension isn't issued automatically.  There are a number of ways to claim your UK pension, which are explained on the government website, or you can contact the UK pension service for advice.

Three to four months before you reach the UK pension age, you should receive a letter from the UK pension authority. If you’re living outside the UK, this means you will need to keep them up-to-date with your personal details or contact them directly when you’re nearing the UK pension age. You can also make a claim online within four months of reaching the UK pension age.

With your UK workplace pension or private pension plan, you should allow yourself plenty of time to contact your UK pension provider to ensure you start getting income when you reach retirement age.  

UK pension services


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1 Comment To This Article

  • emily posted:

    on 22nd February 2017, 16:55:26 - Reply

    It's also important to note that automatic enrolment is part of The Workplace Pension Reform, and requires every business owner in the UK to automatically enroll their workers into a workplace pension scheme