The pension deadline looming for Kiwis who worked in the UK

Friday, 28 March 2025

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Many Kiwis are likely to have spotted adverts for years offering people who have lived and worked in the UK help to access pension entitlements.

But those who have worked in the UK for at least three years may want to get their skates on.

It’s not marketing spiel; a door is about to half-close next week on a chance for some of them to secure thousands of dollars a year extra in retirement.

But grabbing that opportunity will involve forking out thousands of dollars upfront and it is probably fair to say it doesn’t come with zero risk.

Can you start at the beginning?

There is a social security agreement between New Zealand and the UK that means the years Kiwis spend contributing to New Zealand superannuation qualify as years spent contributing to Britain’s state pension scheme if Kiwis retire there, and vice versa for Brits who retire in New Zealand.

People qualify for some sort of British state pension if they have paid national insurance contributions to the British government for a minimum of 10 years, and get the full state pension, currently ₤221 (NZ$498) a week, if they have paid in for 35 years.

It is perhaps not so well-known that any Kiwis who qualify for a British state pension — which would include a lot of British ex-pats — need to claim that from the British government to avoid risking their NZ Super payments.

But up until November 2020 they wouldn’t normally get to keep any of that money.

Instead, if Kiwis qualified for both NZ Super and a British state pension, they would get the latter but the New Zealand government would only top that payment up to the level of NZ Super.

In effect you got one — but only one — state pension in either country, with the slight extra hassle for Kiwis of having to claim the British portion and then having that deducted from NZ Super.

What changed in 2020?

The New Zealand government passed legislation that means any part of a pension that is derived from “voluntary” payments is not deducted from people’s NZ Super entitlements.

That’s important because people who have paid British national insurance contributions for at least three years can voluntarily “top up” their contributions.

Until April 5, UK time, people can pay to fill in up to 18 years of ‘missing’ national insurance contributions, commonly for a payment of just £179 a year if they qualify for so-called Class 2 contributions, but potentially at the rate of £907 a year if they don’t.

After that date, people can only backdate six years’ contributions.

People can also voluntarily pay national insurance contributions at those rates up until the UK pension age of 67, to get close or up to the maximum 35 years of contributions needed to get the full British pension.

An ex-pat who had paid national insurance in the UK for 10 years, for example, could make voluntarily contributions for another 25 years to increase their British pension from the £62 a week they would be entitled to from their past compulsory contributions, to the full state pension of £221

In today’s money, the total cost of the 25 years of voluntary contributions could be as little as £4485.

And that would qualify people for a payment of £11,534 a year from the UK once they turned 67, of which they should get to keep £8238 a year over and above their NZ Super entitlement, under the current rules.

There would have been little point in people who qualified to pay voluntary national insurance contributions doing so before the New Zealand law change in 2020, but now there’s a massive return.

Sounds too good to be true?

Maybe, but the rules seem clear.

Ministry of Social Development manager Harry Fenton says “in a situation where someone receiving NZ Super was also receiving the UK state pension and has made voluntary contributions, MSD would determine that only part of the total UK pension is deductible”.

“The portion of the UK pension which is deductible would be the part attributable to compulsory contributions.”

That rule would change in future only if the legislation changed again, he says.

But there are risks that people considering making voluntary contributions might want to think about.

If people didn’t survive until they were 67 to claim the British pension, they would never benefit from their voluntary contributions of course.

More importantly, the fact that the policies are as they are today, doesn’t mean it is guaranteed they will still apply in 10, 20 or 30 years, given the fiscal pressures on both New Zealand and the UK.

If NZ Super payments became means-tested, as some economists advocate for, that would likely change the equation in making voluntary national insurance contributions.

Perhaps a bigger risk is that the British government might cry foul over paying significant pensions to people living outside of the UK, many of whom will have had very little work history in Britain.

A curiosity of the current rules is that people who spend the least time working in the UK — so long as they did so for more than three years — would benefit most from the voluntary contribution rules.

People who live in New Zealand and qualify for a UK pension won’t see their pension rise in value each year, as it would if they were living in the UK in the years after they turn 67.

Instead, their pension will be frozen at the rate that applies when they reach that age.

Even so, standing back, what is happening here is that group of people are in effect being given an entitlement to, say, 1.7 or 1.8 times a normal UK or New Zealand state pension, in return for one person’s normal contribution plus some quite tokenistic extra contributions to Britain’s national insurance scheme.

People will need to make their own judgment call on whether that is an arrangement that is likely to viewed as sufficiently fair to stand the test of time.

One possibility is that the UK might in future require people reside in the UK for most of the year in order to claim a British state pension. That would mirror New Zealand policy.

But John Ring, operations director of Ireland-based pension adviser XtraPension, believes that is unlikely.

“The UK pays out about 13 million pensions annually, of which about 1.1 million are to people outside the UK.

“Are they going to just stop a pension for 1.1 million people, a lot of whom have family in the UK? These are politicians, so there's no chance of that happening.”

A more likely scenario is the UK raising the pension age to 68 or 69, he believes.

Ring says it is possible to have “a lot of arguments in terms of the ethics” of the voluntary contribution benefit.

“Is it ethical that the [British] government doesn't automatically give people their tax-back entitlements every year, unless they claim it?

“Ultimately, there is an opportunity here for people globally to take advantage of, in a very legal and above board way.”

Fenton says the UK Department for Work and Pensions has not shared any concerns about New Zealand’s 2020 law change with MSD.

All the same, paying voluntary contributions should perhaps be regarded as containing some element of a gamble — albeit one with a payback that seems very much stacked in punters’ favour.

How do I make voluntary contributions before the deadline?

Actually, that’s not exactly necessary. Registering an interest in doing so in a prescribed manner with HMRC (HM Revenue and Customs) by April 5 is sufficient to meet the deadline.

Intermediaries such as XtraPension will help for a fee, or people can do that themselves.

Finding, printing-out, filling-in and posting back an online form called CF83 to the UK has been an option, but with the deadline looming, going fully online may be more practical.

That involves first applying online for a UK Gateway ID, the British equivalent of Real Me.

The place to start is: www.gov.uk/check-national-insurance-record

The steps that follow are not dissimilar to those most Kiwis would be familiar with when applying online for a passport.

People usually need their passport, to download an app, and to upload a photo of themselves using a smartphone.

Then it is a case of checking their national insurance record and advancing through online menus to a form that let’s them register for a callback.

The process will be a lot easier for people who have kept a record of their national insurance number.