Should I Pay My National Insurance as an Expat?

Thanks to the historic economic opportunities within the United Arab Emirates, a significant number of Brits have chosen to pursue potentially lucrative careers in the likes of Dubai and Abu Dhabi etc. Of course, there are many financial planning points that need to be addressed to fully leverage the financial opportunity at your disposal. One common question involves whether or not British expats are obliged or should pay their national insurance while abroad. So, let´s talk more about the national insurance of a British expat. As this can be a somewhat tricky subject, let us take a look at what some industry experts have to say.

The Basics: A Look at State Pensions

Any UK expat will obviously be concerned about retaining his or her state-sponsored pension; even while residing in the UAE. This is arguably the most important reason why continuing to pay contributions is a wise choice. Those who fail to make these national insurance contribution (NIC) payments could therefore be placing their future retirement plans in jeopardy. However, we should point out that it is not mandatory to make regular payments. This is why the topic in question is rather subjective. In other words, it will depend upon the financial status of the individual. This is also why further clarification is warranted.

Qualifying for a Full British State Pension

According to current HMRC regulations, you will need to have worked within the United Kingdom for a total of 35 years in order to qualify for full state pension upon retirement. However, we should also mention that it is possible for expats to “top up” their national insurance while living abroad in nations such as the UAE. The main reason for this observation involves the fact that NIC contributions will provide you with a financial safety net for the future; whether or not you ever plan on returning to the United Kingdom.

A Quick Look at the Rules in Further Detail

Anyone who works outside of the EEA (European Economic Area) will continue making contributions to their national insurance plan for the first 52 weeks. However, this is dependent upon three qualifications (1):

  • Your current employer is also operating a business out of the United Kingdom.
  • You are a legal UK resident.
  • You were living in the UK immediately before choosing to relocate to the UAE.

So, what if you have instead arrived to the United Arab Emirates in order to pursue a career venture? In this situation, you are not legally obligated to continue paying Class 2 National Insurance. However, those who choose to forego such payments could very well be placing their future state pension in jeopardy.

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A Bit of Fiscal Planning Will Go a Long Way

So, we can see that you will first need to determine how much you have already payed into your insurance plan. Considering the fact that the majority of individuals who relocate to the UAE are relatively young, the chances are high that your contributions have not met the 35-year threshold.

The other major point to highlight here involves whether or not you currently have a private pension scheme in place. We should remember that some private pensions are extremely generous in regard to the benefits that they will provide upon your retirement. If you happen to be involved with such an option, the need for national insurance could very well represent a moot point. However, this also depends upon how certain you are that a private pension scheme will remain lucrative until your eventual retirement. This is particularly relevant if you happen to be involved with fund based scheme as its worth could drop in relation to the value of any underlying assets (such as shares).

How Can You Top Up Your National Insurance While Living in the UAE?

It is first prudent to obtain an accurate pension statement by calling the official Pension Centre or by completing the BR19 form. This will essentially illustrate how many years you have been paying as well as the number of years which remain.

You should then download and read form NI38 from the HMRC. The CF38 section on the reverse of the document should be filled out and returned by post or email. You might also be required to list any current and past employers within the United Arab Emirates. This information will be used to calculate how much you might still owe. You can then determine whether or not it is wise to make further contributions. Of course, you can always choose to speak with a qualified adviser if you have any additional questions.

Putting it All Together: To Pay or Not to Pay

As I can see, expats from the United Kingdom who are currently residing in the UAE have rather flexible options in regard to their national insurance payments. The main issue therefore involves how financially prepared you are for the future. Here are some questions to address:

  • How long will it be until you reach the age of retirement?
  • How many years have you been contributing with national insurance contributions?
  • Do you have a private pension scheme and if so, what is its anticipated worth?

If we take a completely pragmatic point of view, it is always better to continue making contributions towards your national insurance. This arises from the simple fact that we never truly know what the future has in store. Those who possess a fallback plan are much more likely to enjoy a greater degree of liquidity upon retirement.

On a final note, there may be other variables which need to be taken into account. This is why it is always prudent to speak with a qualified financial adviser. We will be able to provide targeted advice and turnkey solutions to place you on the right track in terms of future success.

For more insights, further advice or guidance, you can get in touch HERE.

Blog published by Mike Coady.

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