State pension: You could be affected by a qualifying rule change in January – check now

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State Pension payments will be important to millions of people, regardless of whether they choose to retire in the UK or overseas. They are, under current rules, based on the National Insurance contributions a person makes throughout their lifetime. In order to receive any state pension at all, Britons usually need to have 10 years of qualifying NI contributions.

For those who are hopeful of unlocking the full state pension sum, qualifying contributions of 35 years or more are usually necessary.

However, the key idea to note here is whether contributions are actually “qualifying” or not in terms of someone’s National Insurance record.

New rules which come into effect on January 1, 2022 will impact whether a person qualifies for a state pension or not.

And the change is likely to affect those who have lived or are planning to retire abroad.

Under the new rules, UK citizens who relocate to Australia, Canada or New Zealand will not be able to count the time they spent abroad as part of the qualification for the state pension.

The change will affect those who move to live in the European Union, European Economic Area, or Switzerland, and have previously lived in:

  • Australia (before March 1, 2001)
  • Canada
  • New Zealand

The DWP confirms individuals will not be able to count periods lived in these countries towards the UK state pension if both of the following circumstances apply:

  • A person is a UK national, EU or EEA citizens or Swiss national
  • A person moves to live in the EU, EEA or Switzerland on or after January 1, 2022

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The second point also includes those who move to live in another EU, EEA country, or Switzerland on or after January 1, 2022.

The Government states: “The change will affect you whether or not you have claimed your UK state pension yet.

“Your UK state pension will be calculated, or recalculated if already in payment, using only your UK National Insurance record.”

The change is taking place due to the UK officially leaving the EU now the Brexit deal is done.

Changes taking place from 2022, however, will not affect certain groups, which the Government has clarified.

Individuals who live in the UK, whatever their nationality, will not be impacted.

Similarly, UK nationals, EU or EEA citizens or Swiss nationals who were living in the EU, EEA or Switzerland by December 21, 2021 will not be affected.

As long as a person continues to live in the same country, they will still be able to count time living in Australia (before March 1, 2001), Canada or New Zealand to calculate a UK state pension.

Those living in an EU or EEA country, or in Switzerland will still have their UK state pension increase in line with the rate paid in the UK.

This is known as the Triple Lock Mechanism, which sees the sum rise each year by the highest of three components: average earnings growth, the rate of inflation, or 2.5 percent. 

As a result of the changes, people may need to plan ahead with regards to how they see their retirement panning out.

Having a clear understanding of the sum one is scheduled to receive will be important.

This can be done through the use of the state pension forecast tool, which offers insight into how much a person can receive and when.

It can be accessed by the Government’s official online portal or by calling the Pension Centre.

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