UK State Pension Buyback Guide [From Ireland].

In order to qualify for the minimum UK State Pension, an Irish national must have 10 “qualifying years” on their UK National Insurance record. A qualifying year is a year where you either:

Fortunately, HMRC will work out how many qualifying years you have on your record, so you don’t need to worry about the complexities here.

Obtaining 10 qualifying years in order to qualify for the minimum UK State Pension isn’t a big deal for Irish nationals who worked in the UK for long periods of time. But what about Irish nationals who spent less than 10 years working in the UK before returning to Ireland? Is it still possible for them to claim the UK State Pension from Ireland? Yes it is.

You see, when an Irish national moves back to Ireland and stops paying UK National Insurance contributions, the UK Government views his/her absence from the UK as a ‘gap’ in the individual’s National Insurance record. ‘Living or working outside of the UK’ is in fact listed as one of the primary causes of gaps in a National Insurance record. Gaps in the National Insurance record could cause issues for UK citizens who spend many years working abroad as they may not qualify for a full UK State Pension in retirement.

To prevent this from happening, the UK Government allows Voluntary National Insurance Contributions to be made, the purpose of which are to fill gaps in one’s National Insurance record. In layman’s terms, voluntary contributions are used to purchase ‘qualifying years’ on one’s National Insurance record. Voluntary contributions allow Irish nationals who previously worked in the UK to achieve two things:

The UK Government allows you to make voluntary national insurance contributions to fill gaps in your National Insurance record that have arisen over the past 6 years, with a deadline of April 5th each year. For example, for the tax year 2023/24, you’d have until April 5th 2030 to make a voluntary contribution if required.

In layman’s terms, the rules allow you to purchase a maximum of 6 qualifying years on your National Insurance record in one go, and those 6 years are always the 6 years immediately before the current year. Once you’ve purchased those 6 years, your only option is to buy one qualifying year at a time as needed.

We’re currently in 2025, meaning that, under the UK Government’s normal rules, you’d only be able to fill gaps in your record between 2018 and 2024.

However, until April 5th 2025, the UK Government is allowing voluntary national insurance contributions to be made to account for gaps in National Insurance records arising between April 2006 and April 2018.

In other words, until April 5th 2025, you can buy up to 18 qualifying years in one go (i.e. 12 special years plus 6 regular years). This would allow an Irish national with less than 10 qualifying years on their record to qualify for not only the minimum UK State Pension, but a UK State Pension of decent size.

After April 5th 2025, the rules will revert back to a maximum of 6 years, so you need to act fast.

The original deadline for the special rules was April 2023, but due to a huge influx of claims, it was extended on more than one occasion.

There are some conditions that Irish nationals must meet in order to be able to make voluntary national insurance contributions. The exact conditions that apply will depend on whether the Irish national is making ‘Class 2’ or ‘Class 3’ voluntary contributions.

As a rule of thumb, as an Irish national who is back living and working in Ireland, you always want to make Class 2 contributions if possible. Reason being, while there is no real difference in the benefits that you’ll receive from making Class 2 or Class 3 voluntary contributions, there is a BIG difference in the price of making a Class 2 or Class 3 voluntary contribution. We’ll discuss that in more detail in just a moment.

In order to make Class 2 voluntary contributions the following conditions must apply:

In order to make Class 3 voluntary contributions the following conditions must apply:

The current rates for Class 2 and Class 3 voluntary national insurance contributions are £3.45 per week and £17.45 per week respectively. Therefore, purchasing one qualifying year for your National Insurance record, at the current rates for Class 2 and Class 3, would cost £179.40 and £907.40 respectively. As you can see, Class 2 contributions are 80% cheaper than Class 3 contributions.

It’s important to note that the cost of voluntary national insurance contributions does increase over time. As such, purchasing as many qualifying years as you can now could save you money down the line. Furthermore, should your eligibility for Class 2 contributions shift to Class 3 contributions in the future, it will be significantly more costly to purchase qualifying years. Therefore, those eligible for Class 2 contributions today should take full advantage of that fact insofar as possible.

When you’re making Class 2 contributions, the price you pay to fill a gap in a prior period is always the current year price for all years except the previous year. When you’re filling a gap in the previous year you pay the Class 2 price for that year. When you’re making Class 3 contributions, the price you pay is always the current year price for all years except the last two years.

The value of the UK’s ‘New State Pension’ is £221.20 per week, which is £11,502.40 per year. You need 35 qualifying years on your National Insurance record in order to be entitled to the full UK State pension.

The minimum of 10 qualifying years needed on your National Insurance record would buy you a UK State Pension entitlement equal to £63.20 per week or £3,286.40 per year^. Remember, this is an entitlement to the UK State Pension every year in retirement until you die. The more qualifying years you have in excess of the minimum requirement of 10, the more UK State Pension you’ll get.

^ £63.20 per week = (£221.20*(10/35)) & £3,286.40 per year = (£11,502.40*(10/35))

In short, yes. Each qualifying year purchased on your National Insurance record is worth £328.64 per annum for life. The purchase price is £179.40 at Class 2 and £907.40 at Class 3. Therefore, the time to breakeven on your investment before-tax is just 7 months at Class 2 and 2 years and 9 months at Class 3. Everything after that is pure profit after-tax.

Looking at it another way, £328.64 per annum for life roughly converts to €394.37 per annum for life. Assuming an open market annuity rate of 5%, you would have to pay the life assurance companies in Ireland €7,887.40 to receive the same amount of value that’s on offer from the UK State Pension for just €215.28 at Class 2 and €1,088.88 at Class 3. That’s a discount of 97% and 86% respectively. So, even if you solely qualify for Class 3 contributions, the deal on offer is still extremely attractive. As for Class 2 contributions, they’re arguably the best possible use of savings there is.

If you were eligible to purchase the maximum of 18 qualifying years that are on offer until April 5th 2025, that would cost you £3,229.20 at Class 2 and £16,333.20 at Class 3 as a once-off payment. However, what you would gain is an added annual UK State Pension entitlement of £5,915.52 for life. Assuming you already had, say, 5 qualifying years on your National Insurance record, your UK State Pension entitlement would be £7,558.72.

It must also be mentioned that the UK State Pension is ‘triple-locked’. Meaning, its value will increase every year by the higher of:

By contrast, the Irish Government offers no equivalent triple-lock provision for the Irish State Pension. So, you’re not just ‘buying a UK State pension’, you’re buying an entitlement to an inflation-protected, Government-guaranteed income stream for life – at a fraction of the price of open market annuities.

Yes, income you receive from the UK State pension is going to be liable to Irish tax provided you’re Irish tax resident and domiciled in Ireland. The more tax you pay, the longer it’s going to take to break even on your voluntary contributions. However, even with tax, voluntary contributions are still a no-brainer.

Irish nationals need to consider whether or not they’re going to return to the UK to work in the future, especially if they’re young.

If you purchase qualifying years now via voluntary contributions, and you then subsequently return to the UK to work, you might end up receiving the full UK State pension through work alone. In that case, the qualifying years that you purchase now would go to waste. So it’s a question of either:

The additional caveat is that you’ll only have the ability to only purchase a maximum of 6 qualifying years in one go in the future, rather than the 18 qualifying years that are available until April 5th 2025.

If you’ve no intention to return to the UK for work in the future then this section doesn’t concern you.

Here are the steps that you need to take in order to claim the UK State Pension in Ireland before April 5th 2025^:

^Please note: Irish nationals who previously worked in the UK will still be able to claim the UK State Pension after April 5th 2025 if they’re eligible. The reference to April 5th 2025 solely concerns the ability to purchase up to 18 qualifying years in one go which will expire after this date.

It is crucially important that you get this process started ASAP. HMRC is experiencing a huge surge in customer requests, hence why the deadline was extended from April 2023 to April 2025. The sooner you get this process started, the more likely it is that HMRC will get back to you before the deadline.

As for payment, if you’re paying for Class 2 contributions, you can pay online using your online banking details and the 18-digit reference number shown on your HMRC payment request. This reference number is entered onto a webpage where you’ll subsequently be prompted to pay via bank account. If you’re paying for Class 3 contributions, you can pay online in a similar fashion. You’ll need to enter your 18-digit reference number which you’ll find on your bill.

Once you’ve pay your contributions, you’ll then receive a notice each year from the HMRC for the tax year just gone. Essentially, the HMRC is notifying you of the amount that would need to be paid IF you wanted to add the prior tax year just gone to your National Insurance record. There is no obligation to pay contributions beyond what you initially specify to HMRC.