Never Look a Gift Horse in the Mouth!
By ROBERT O'CONNOR
The British welfare system does not have the direct equivalent of our Canada Pension Plan (CPP) (see previous Celtic Connection article June 2006). What they do have is an equivalent identifying code that tracks tax-paying workers.
In Canada we call it a Social Insurance Number (SIN) (nine digits in total). In the UK, it is called a National Insurance number (NI) (nine digits in total). If you have ever worked in the UK, you would have been assigned an NI number.
If you left Great Britain many years ago as I did, you like the majority of expatriates, will have lost or misplaced this identifying number. Not to worry, there are ways in which it can be traced by the powers that be!
The old proverb: "Never look a gift horse in the mouth" (Interpretation: When given an "opportunity," do not inquire too minutely into its intrinsic value!) could not be more appropriate for anyone who has ever worked in the United Kingdom.
Today's British state pensions are paid to anyone who has contributed a minimum of National Insurance contributions. In the simplest of terms, to receive a minimum pension of approximately £21 per week, a woman, in her own right, must have made 10 years of National Insurance contributions. A man, 11 years.
Women are entitled to start receiving their UK state pension when they reach age 60, men at age 65. This will be changing for the ladies from the years 2010 to 2020, as age of entitlement will gradually rise to age 65, the same as the boys!
One of the quirks of the UK state pension system is that a married spouse (even though she has never worked or been to the UK) can receive a UK state pension based entirely on her husband's NI contributions, this is called a class "B" pension, and is at the equivalent of 60 percent of what her husband's UK state pension would be at age 65. The husband's UK state pension, by the way, is classified as a class "A" pension.
In order for the maximum UK state pension to be paid to anyone today, a woman must have contributed 39 annual NI Contributions and be age 60. A man must have contributed 44 annual NI Contributions and be age 65.
The current maximum UK state pension for the British tax year (ending April 2007) is £85.25 per week for class "A" pensions, and approximately £50 per week for class "B" pensions.
Added together, a man and his wife could receive £135 each week or £7,020 each year and for the rest of their lives. Under present legislation, if they both remain in Canada for the rest of their lives, both living coincidently for another 20 years, the amount that they would receive over these two decades would amount to approximately £140,400 or C$300,000 (at an exchange rate of around C$2.15 to the pound sterling.)
Now to the part that may interest you as an expatriate. Due to a British Government computer glitch in the late 1990s, the government is allowing anyone who has ever made NI contributions to go back 10 years (to the year 1996) and make voluntary National Insurance contributions (and at the very best "Class" rate). This is were any expatriate must not look "the gift horse in the mouth."
If you qualify, there is no better investment! Believe me, I have seen many, many expatriates achieve this very valuable "economic work right." Remember, as an expatriate you are legally entitled to a British state pension because of the NI contributions paid by you in the past. The voluntary contributions that you may now be willing to pay, will ensure that you receive the maximum class "A" and "B" UK state pensions.
Do your research, seek out a competent financial advisor, and have them work it all out for you. I promise you, you will not regret the time and money invested. It is your pension right, don't lose out by inaction, and "never look a gift horse in the mouth!"
Robert O'Connor is a British expatriate and a specialist on Canada's CPP and British state benefits. He can be reached by e-mail at roconnor@telus.net or call (604) 682-8087.
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