Rule changes will affect whether a claimant will be eligible for state pension payments post-retirement and will come into effect on January 1, 2022. As part of the changes, UK citizens living in Australia, Canada or New Zealand prior to March 1, 2001 will no longer be able to count any time they have spent abroad as a qualification period for the state pension. Ahead of this shift in pension policy, the Government is alerting those affected that changes are coming which could hit their retirement plans.
Commonly, the average person needs to make at least 35 years of National Insurance contributions to receive the full state pension.
On the Government’s website, the DWP stated: “As long as you continue to live in the same country, you will still be able to count time living in Australia (before March 1, 2001), Canada or New Zealand to calculate your UK State Pension.
“If you live in an EU or EEA country or Switzerland, your UK State Pension will continue to be increased each year in line with the rate paid in the UK.”
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John Westwood, the Group Chairman at Blacktower Financial Management, is calling on the UK Government to issue clearer guidance on how this will affect peoples’ retirement pots.
Mr Westwood said: “The UK Government has forewarned of changes to how UK state pensions are calculated for some of those living abroad and the changes are due to begin in just 12 weeks from now.
“This change in rule comes at an already difficult time for expats and the government needs to lay out clear guidelines on the new state pension breakdown as we enter 2022.
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“We urge UK residents who have already lived in Australia, Canada or New Zealand to do their research before moving abroad.”
Addressing the state pension issue, James Andrews from money.co.uk outlined the importance of the expats prioritising their retirement plans to save money.
Mr Andrews added: “The recent changes to state pensions serve as a timely reminder that you have to put a comprehensive financial plan in place if you’re intending to retire abroad.
“For starters, the process of moving your money overseas can take quite some time, so it’s best to start as early as possible.
“In some countries, for example, you can’t even set up a bank account without a residential address there, so it might be worth applying for a prepaid travel card or current account to act as a stop-gap while you sort out the Ts and Cs.”
On top of his warning, the financial expert explained the best way people can move their money abroad and assets across countries.
He added: “The quickest and easiest way to get an overseas bank account set up is to speak to your existing bank to see if they have a presence abroad – it’ll make moving your money to your desired country much easier.
“The other issue that needs careful consideration is your credit history.
“When you emigrate, your credit history, unfortunately, doesn’t move with you – meaning you’ll be starting completely from scratch.
“In practice, this will likely mean a massive reduction in your borrowing potential, so you need to have a plan in place in case of unexpected bills.
“Since you might not be able to rely on a credit card or qualify for a loan, it’s a good idea to have some emergency funds in place to see you through any financial difficulties.”
These changes to the state pension will affect expats as of the first day of the new year.
All expats are encouraged to make the necessary financial plans to avoid being detrimentally affected.
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