I didn’t know I was eligible for a UK pension worth up to $270,000

Saturday, 28 February 2026

If you did your OE in Britain and worked throughout that time - even pulling pints at a pub - you may well be eligible to claim a modest pension.

Janine Starks is the author of www.moneytips.nz and a financial commentator with expertise in banking, personal finance and funds management.

OPINION: I’m a 55-year-old Kiwi, entitled to a UK pension of $13,500 a year, on top of super and KiwiSaver. If I survive 20 years in retirement, that’s $270,000.

Just to be clear, this seems fairly unbelievable given I nipped off on an OE in my late 20s, returning five years later with a fist full of cash to buy a house.

As a financial expert, my left eyebrow went skyward and I settled down to see what pension gimmick was being peddled. But John Ring, operations director of Irish company XtraPension.com was correct. He ran the numbers while I ferreted about fact-checking the situation.

You only need to have worked in the UK for three years to register for this voluntary pension, but the deadline to apply is approaching fast.

What’s the catch?

Well, it’s not free, but it’s one of the most remarkable return profiles I’ve ever seen.

To get this money, I need to buy-back six years of past payments at $400 a year (2020 to 2025). These are voluntary national insurance contributions, paid to the UK tax department (His Majesty’s Revenue and Customs, HMRC) and they can be spread out until 2030.

Going forward, I can then choose to contribute another $2000 a year until the UK retirement age of 67 (12 years time for me). All up, that’s $26,400 staggered over the next 12 years.

In total, that means I’m eligible to purchase 18 years of the UK’s voluntary pension. There’s no big lump sum payment required, making it very affordable.

My stint in Britain entitles me to an annual income for life of $13,500, starting at age 67.

If I live to age 87, it’s $270,000 of income, a return profile of 10 times my initial investment. This money won’t be deducted from my New Zealand super as it’s a voluntary part of the UK state pension.

Even taking into account the cost of applying for a UK pension, and the effects of inflation, the return on offer is remarkable, writes Janine Starks.

I recall UK pensions hit my radar a year ago, when Post journalist Tom Pullar-Strecker wrote about them. I didn’t get off my chuff and sort it, so assumed that ship had sailed. That was a bad mistake as the opportunity to buy back past years’ contributions was even bigger back then.

There’s now a final deadline, for those of us who worked in the UK for less than 10 years. Due to Easter, we need to apply by Good Friday, April 3, as the last day of the tax year falls on Easter Sunday. It takes HMRC over a year to process the application.

Whoops I’ve struck a hiccup

On reading the fine print, I discover I’m personally not eligible to buy back the past six years at $400 a year (which are classified as cheaper “class 2” contributions). Why? Because I’m retired. I need to pay the more expensive “class 3” rate of $2000 a year. That makes my overall payment $36,000 over 12 years.

Putting on my investment hat, that’s still a payout ratio of 7.5 times the original cost. It’s still an outstanding payoff.

The good news is, if you’ve been working in New Zealand in the last six years and worked in the UK immediately before leaving, this condition won’t affect you. You’ll be eligible to pay the $400/year rate.

This type of pension is known as an “annuity”. If you die before retirement age, there isn’t a refund, or a transfer to a spouse. After age 67, the income stops on death. It’s like NZ Super in that regard.

I also need to be aware of inflation:

1. Each year, for the next 12 years, I’ll pay $2000. This cost will rise with inflation. If we assume 2% a year, total costs for a working 55 year old, increase from $26,400 to $29,200.

2. The $13,500 annual income I’m entitled to for life will not rise in value once I retire (unlike UK residents who get increases). Over 20 years, at 2% inflation each year, my payments which total $270,000 will see their real value deplete to $212,000.

My view? Still an outstanding return which I couldn’t recreate for that initial cost.

So, do you have to figure this out yourself?

You can if you want, but I can’t be bothered as I find HMRC a bit painful. XtraPension.com can do it for you and their fee is $1650 if you’re approved (full refund if rejected). Push the start button on their website and kick things off, by finding your old National Insurance number.

Is it a loophole the British will close? Yes, and they have. They feel they’ve been too generous and the cheap rate of $400 a year for future years’ entitlement was withdrawn in the last Budget and increased to $2000 a year.

As far as they’re concerned the loophole is closed, but even at the new rate of $2000 a year, the payoff is incredibly good.

Janine Starks is not a financial adviser and her column should not be taken as financial advice. Readers should always seek specific financial advice appropriate to their own circumstances.