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State Pension Entitlements For UK Expats



 

It’s all happening in the UK at the moment; at the time of recording this the general election is just one week away, and the outcome could determine when, how and if Brexit will end up happening.

The UK’s exit from the European Union and the tax and social security implications have been top of mind for British expats for a long time now. We're checking in on these issues with tax advisor Oliver Heslop on today’s show, he’s also going to explain why it could be well worth Brits abroad - and anyone who has worked in the UK - investigating their pension entitlements.



Carlie: Hey there, it's Carlie with another episode of the Expat Focus podcast.

It’s all happening in the UK at the moment; at the time of recording this the general election is just one week away, and the outcome could determine when, how and if Brexit will end up happening.

The UK’s exit from the European Union and the tax and social security implications have been top of mind for British expats for a long time now. We're checking in on these issues with tax advisor Oliver Heslop on today’s show, he’s also going to explain why it could be well worth Brits abroad - and anyone who has worked in the UK - investigating their pension entitlements.

Oliver Heslop is back on the Expat Focus podcast this episode. Managing Director of GETS - Global Expat Tax Services - and Oliver, I really feel like this should be a true crime show this evening, because you're coming at me from a car park, in the evening, somewhere in the UK. What's going on? What stealth activities have you been up to?

Oliver: [laughs] I've been to meet a client in Suffolk, and it's Brexit central, basically. There's a huge movement here to restrict freedom of movement and the flow of expats into this area. But I think, when it comes down to it, they're really important to the economy. And I think it'll work out, won't it? It's not a black and white thing, is it, Carlie?

Carlie: No, it's not. And it's actually the subject that we're going to start with today. It has been a while since we've talked, and it's been a while since we've discussed Brexit on the Expat Focus podcast.

The UK, as we're recording this, it was gearing up for a 31st of October exit; then Prime Minister Boris Johnson was blocked, had to ask the EU for an extension; right now, the new Brexit date is the 31st of January 2020, supposedly with or without a deal.

In the meantime, a UK general election has been called for the 12th of December, which is very soon. There's certainly a lot going on for British expats to be keeping up with at the moment.

Oliver: Yes. Exactly. That's right. That's the big question, especially, I would say, I suppose British people in France and Spain, they're rightly really nervous, because in terms of rights, can they just stay without question? I don't think they can, but what is the law? That's what people keep asking me.

Carlie: And so what are clients, and prospective clients, coming to you with questions about, and what are you able to tell them right now?

Oliver: People are coming to me and asking, will I be OK to stay? If a British person in France comes to me, you can bet they'll know more about French law than I will, because it's their main preoccupation. What I know about and they don't is the way the law is shifting - the movement of our parliament. So, for example, I know what Boris Johnson is saying every day. And he's wavering on restricting immigration altogether, for example; and I know what Jeremy Corbyn's saying.

So we put together the two pieces of the puzzle: I've got the good local knowledge here, and in the meantime they're discussing immigration over there, in depth. It's crazy really, they come to me with the answer already, but I can add to it with what's happening at this end.

Carlie: We've seen in the Expat Focus forums and Facebook groups - I'm a bit of a lurker in the France group, for obvious reasons, being in France myself but not as a British expat, as an Australian - we see a lot of people speeding up their plans, at the moment, to get over to France before Brexit, to try and put down roots; to establish time in the country as residents; hoping it will count. Is that the right way to go about it? I know other people are taking the wait and see approach. Is there a perfect thing to be doing right now?

Oliver: I don't think there is a perfect thing. My stock cliché I always tell my clients is, don't let tax or immigration [indecipherable] all the dots. So, you do what suits you. I very much like the idea of getting out there sooner rather than later and starting to accrue years, but only if that suits your personal circumstances. I've got people who aren't ready to retire yet, so they can't; they own that French property, but they still have to live here.

But yes, I agree that it makes sense to be putting down roots out there sooner, if it's not wholly impractical to do so. The UK property market's flat as well, at the moment, so that's another problem, isn't it? If you rush to sell now, are you going to miss the next boom? It's just so difficult.

But what you were saying, Carlie, is definitely the best idea: sooner rather than later. Get your move started.

Carlie: Oliver, you did mention before people movement and Boris Johnson potentially wavering. Obviously there's a lot that's going to change between when there are concrete answers and now, when we're speaking. But what are you seeing in the UK as the election campaigns ramp up?

Oliver: I think the health campaign is fascinating, isn't it? Because immediately after Brexit, a big portion of the country was saying "We've had enough, we don't want free movement," but at the same time saying "We've got to protect the NHS, nurses and doctors especially." And our Prime Minister, Boris Johnson, is saying that now already: saying "I want to protect that group; not only protect it, but I want to encourage, by fast-tracking entry into the UK."

So that is not the restriction on freedom of movement that people voted for, but it's a necessity for our economy. So it's great, in a way, that people are seeing a practical solution already to that black and white Brexit that we face. So that's good.

Just one quick point on Jeremy Corbyn: although he's behind in the polls, he himself could end up with a government in conjunction with the Liberal Democrats, and they are talking about continued freedom of movement: as free as it is now. So that's how complicated it gets: you can't write off Boris Johnson not getting a full majority.

Sorry, I know it's a bit difficult to get your head around, but I just look at the two main horses in the race, and Boris Johnson is already saying "I've got certain groups that I want to protect, and I want to come over," and the Labour and Lib Dems are saying the same: "Please still come if you're of value to us."

Carlie: So freedom of movement has been one big issue, and we spoke to Eleanor of the In Limbo books and movement about not having concrete agreements and plans for people who are EU in the UK, and UK in the EU, and knowing what their future is going to hold.

The other issue is reciprocal healthcare and national insurance. Is there any clarity of the way that might go with a potential Brexit at the end of January?

Oliver: No. It's really interesting, because there's no clarity whatsoever. It's quite a mess. But everybody... I mean, I belong to a forum of about 70 specialists around the UK, and we're all very relaxed about it.

But the issue here is, if I go to work in France for two years tomorrow, and I want to stay out of their social security and carry on paying national insurance, that's all under EU law. So if EU law is pulled away, suddenly I'm going over to a country that's going to try to apply social taxes to me at 10%, 20%, 30%. I've become a local overnight.

So the question is, if EU law goes, what happens? And what we're all saying is, we're not all worried, because the countries have always cooperated. I know that's a hard thing to say, we're seeing a lot of bitterness at the moment, but we've never seen any expats clobbered in that way. When there's been uncertainty there's always been a grandfathering of the law, or a relaxation, or a transition period. So the uncertainty is awful, but we've never seen people punished in that way. It's just unfortunate that I can't give a dead certain answer.

And if people are really frightened, just email me and we will thrash out an individual case. It's just one of those many areas isn't it, Carlie, where people just don't know at the moment.

Carlie: And that's an important thing to highlight, too, is that you really need to assess people on a case-by-case basis, and their tax situation, to understand what the right option is for them with regard to Brexit, and residency, and...

Oliver: Absolutely, that's right. So if somebody comes to me at age 55 or 58, we're into a different scenario altogether. They're closer to retirement; they might not be paying social security anyway, they might just be drawing the state pension from the UK, not worrying about the host country. All sorts of things flying around. But we can definitely sort it out. It's just that we don't have it finalised yet.

The speed at which the current government resolve things on agreements, it happens very rapidly. It tends just to be a conversation with Brussels when they say "Alright, that's not a quick fix, let's carry on as we are." That seems to just keep on happening. It's just a little frustrating for people who are trying to plan things properly.

Carlie: Oliver, I know I'm guilty of staying out of the loop when it comes to what's going on in my home country. I'm sure a lot of British expats are similarly not quite up to speed right now. So could you tell me the headline points that people should know when it comes to the major parties in this upcoming election, and their stance on Brexit?

Oliver: We've got Prime Minister Johnson in power. And the whole reason he's called the election is because he can't push through the withdrawal agreement, there's too much opposition. There are too many heads on the other side, at the moment.

His plan is to go with the agreement which he recently struck with Brussels. It's not a big change from the Theresa May one; he's playing on the fact that everybody's sick of it, and his slogan is "Get Brexit done." So he just wants to get a bigger majority, push it through, and then we move to phase two. But yes, Brexit would definitely be happening.

Jeremy Corbyn comes next, he's the second person in the polls, he's head of the Labour party. His view is that Brexit is not a done deal yet, and if he were to get elected, he would go to Brussels again, get a slightly different agreement - I think it's more around protection of the environment, workers' rights - very typical of Corbyn, you know, very admirable, actually, of Corbyn, to say "It's been rushed through too quickly, it's not just about business." So there's more of a people's charter.

He would get a new agreement, and then he would go back to the people for referendum #2. And Jeremy Corbyn will not say whether he'll back Brexit or back leaving. That's his position.

Both PM Johnson and Corbyn are being criticised for views they've got, but those are the two positions.

The third main party is Jo Swinson, of the Liberal Democrats, and her plan is to scrap Brexit altogether, just to scrap it overnight. That again is upsetting some people, but that is the only clear Remain party available, and she has been pairing up with Plaid Cymru in Wales and the Scottish National Party: those are the ones that stand against Brexit happening altogether.

I suppose the final point to mention is that Jeremy Corbyn and Prime Minister Boris Johnson, those are the two that are most likely to lead the next government, and neither of them are promising big tax increases. We actually thought that Boris Johnson was going to massively reduce taxes on people under £100,000 - he can't do that because he wants to pay for the NHS, build hospitals, and attract nurses. So very interestingly for me as a tax person, there aren't any big changes on the horizon, so they say at the moment. Nobody's talking about big tax increases.

Carlie: So I guess your biggest piece of general advice that you might be dishing out to Brits abroad at the moment is just to stay the course?

Oliver: I think just stay the course. Obviously I try very hard not to say what my feelings are either way on Brexit, but what I say is that, the way it stands at the moment is that Boris Johnson is ahead in the polls; it looks like we're about to get a version of Brexit.

The things that I worry about, [like] massive restriction on immigration, it seems to already be weakening. And in terms of attracting highly skilled expats to London and the South-East, Boris Johnson and Jeremy Corbyn both still want that. The big fear that people moving will end... I just can't see it happening, because our economy can't survive. So they'll both produce a version... you know, there's talk of reducing corporation tax... they very much want the right sort of people still here. That's their words, not mine.

I've worried a lot about social security - as you do, if you're a tax person - I've worried a lot about national insurance, and the like, and we are all over it. We just don't have a law yet, but we know how to manage and reassure people. The same with state pensions.

Carlie: And that is the other topic that we wanted to cover today, Oliver, because state pension has been right at the top of mind.

Oliver: The big thing there is... I've got a few American clients who, I should say, actually, [there are] British people living in America who assume they won't get a state pension, and that is far from the truth.

What we're seeing is a lot of people in the US and Europe who have been there ten or fifteen years, and they just think they'll get nothing, they think they're out of the system. But it's quite the opposite. Those people who have paid national insurance, they've all clocked up an entitlement to a future state pension. It's sitting there, but it needs to be claimed, and you need to get your name against it, you shouldn't let it drift. You need to remind HMRC that you've still got that pot.

Carlie: That's really interesting. Is there a minimum number of years that you need to have worked in the UK work force to be eligible for a state pension? Does it matter how long you've been abroad?

Oliver: Yeah, it's currently ten years. It changes every so often, but it's ten years at the moment. So what I find is that people who have left in their twenties and thirties, they may not have that full ten years yet. We can get around that - there's ways to solve it - but your baseline, in your head, is ten years. And if you've got less than ten, ask Oliver; if you've got more than ten, let's discuss.

Carlie: Ask Oliver either way!

Oliver: Yes, yes, it is. Yes.

Carlie: But obviously, you're in a better position if you've clocked up at least ten years?

Oliver: If you've got the ten years, great. What's happened lately is that we have found a way, completely within the law, we can just boost up people's pots. So I meet people with five years in their pot, they get absolutely nothing, and then we haggle and negotiate with the tax authorities and we can push up that pot to ten or fifteen years.

Carlie: That's really interesting, and it's something I wouldn't have thought was possible. Do you think a lot of people don't realise that this is an avenue they can take?

Oliver: No, I don't think it's known at all. We've been doing loads of discussion on Facebook - we've become a bit of a sounding board - and people don't know. If you start your new life at twenty-five or thirty, you just wouldn't think about it, would you?

Carlie: But Oliver, what is a pension pot if you've only clocked ten years in the UK? What are we talking about at retirement time?

Oliver: OK. So what it would be in today's money, would be... it's about £2,500 - between £2,500 and £3,000. So let's say you've done eight years at the moment, you've got nothing, you get nil. If you and I, Carlie, for example, sat down and pushed you over the ten-year mark, by agreeing that with the revenue, suddenly that's an extra £3,000 a year. And we're all due to live to 80 - more than 80 - that's an extra £35,000-£40,000 you wouldn't have got otherwise. So it's quite a thrill. Well, it's a thrill for me, anyway!

Carlie: Yeah, and I guess it could be the difference between having enough cash at retirement age to go see a movie or, I don't know, treat yourself to better brand food, or something.

Oliver: I think that's right. I think if it's, let's say, an extra £3,000 a year that you weren't getting otherwise, I say to people, well you could always just pass it straight onto the grandchildren, if you are settled and you have enough money.

Carlie: It covers the presents!

Oliver: That's right. Or, you know, a flight for the two of you, a holiday for the two of you. It's a nice top-up, I suppose. You're right, it's got to be one of a number of pensions, hasn't it, unfortunately.

Carlie: So Oliver, you've just revealed that there is this very useful loophole to top up your UK pension. Does this mean that people can just circumvent needing to go to you to do this, and chat to the revenue office themselves to work out a deal?

Oliver: Well, they absolutely can. People are doing that. But they are coming unstuck. It can be done, definitely. But you will probably win, maybe, I think, four or five years max, whereas we, because of what we know... I'm not being [indecipherable] at all, it's all based on the legislation - we can win ten or twelve years. We normally put in emails, "If you think you can do it yourself, please don't." Because absolutely, people can go ahead, but we can get a much better result simply because we do two or three a week. I've done over 100, actually, so it's definitely worth a chat with me, even if you decide you don't want to do it.

Carlie: And, you know, I've actually pointed a few people in forums your way, because I know that you do give a free initial consultation when people offer questions, and I think that's so valuable.

Oliver: Absolutely. And the other thing, especially with Brexit at the moment, is I love hearing - you want case studies, don't you? So I only know what people are telling me on the ground. I'm reading the law all the time, and I chat to my existing clients, but new people have always got new experiences to tell me.

Carlie: Well we've talked the latest on Brexit, Oliver; we've dived into this interesting way you could get a bit of extra unexpected cash at retirement if you investigate your UK state pension. What else is happening on the expat tax front that is worth highlighting, before we wrap up today's episode?

Oliver: Well, my big crunch topic at the moment is, are all of my British clients coming home from the Middle East? Especially the UAE - Abu Dhabi and Dubai - I've got quite a lot of expats over there that I work with, and I was thinking, is there a definite flow back now, a net flow back to England, rather than the other way around?

And the reason for that, I've heard that they're talking about applying some taxation in the first time in the UAE, which expats will know about. We haven't seen that yet, but there's talk about it, to pay for a military for the first time.

And then the other thing they're talking about is the property market really sliding down. I mean, I'll be telling expats out there, they'll already know all this, but my comment was that we are still seeing people going out there, and Christmastime, now, is a time for people to re-evaluate and think, is it time to repatriate? And I'm seeing a big movement back. I think there's still a really big proportion of British expats out there.

Carlie: Yeah, I'd be really interested too, and if you join our forums and Facebook groups, we have one for expats in the UAE - and at ExpatFocus.com you'll find all the links - that would be a really interesting discussion. Is the Middle East as lucrative as it once was, right now, from a tax perspective?

Oliver: When I meet people who have been there for ten years and they don't have any savings, and I imagine it's because they've just been enjoying themselves, it's not at all. Cost of living is huge, and if property prices are now falling, it'd be good - as you say - it'd be good to know what the new trend is.

Carlie: Well Oliver, I know you're still sitting out there in the dark, in a random car park, on a wet UK evening, so I will let you go somewhere warm and less freaky.

[laughter]

Oliver: Thank you! People get arrested for that sort of stuff, don't they, so thank you, Carlie.

Carlie: We'll check in soon.

That's it for this episode. If you have a question for Oliver, head over to ExpatFocus.com, click on the 'Services' tab, go to 'UK Tax Filing,' and you'll be able to request no-obligations advice.

Be sure to check out our other episodes; we cover all aspects of expat life, all over world. If you like what we do, please leave us a review on Apple Podcasts, or however you like listening to the show, and I'll catch you next time.


 


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