THE UK GOVERNMENT has announced the closure of a loophole that has for years let Irish people who once worked there to claim a British state pension with very inexpensive contributions.

The chancellor of the exchequer, Rachel Reeves, mentioned the change to the pension system in her budget announcement last Wednesday, saying that “taxpayers’ money should not be spent on pensions for people abroad… who only lived here for a couple of years and may never even have paid a penny of tax”. 

The impact of the change on Irish people was first reported by the Irish Independent. 

What is the current situation?

The arrangement has made it possible for people who had worked in the UK for three years in a row but then left the country to top up their pension years through purchasing voluntary national insurance contributions (VNICs). 

They were able to buy these at a “class two” rate. This is a relatively inexpensive rate – just £182 (€207.12) for the current UK tax year.

In order to qualify for the lower rate, under the outgoing rules, people had to have been working up until their departure from the UK and to have worked outside the UK after that. 

What’s changing? 

Reeves said that she would abolish access to “class two” rate for people living outside the UK and increase the time that someone has to have lived or worked in Britain to ten years, a significant increase from the current three-year requirement. 

Now, people will have to pay the “class three rate” of £923 (€1049.09) a year – more than five times higher than many people were paying until now.

The changes will come into effect on 6 April next year, meaning that if Irish people who previously worked in the UK want to continue to pay voluntary contributions after that date, they will have to pay the higher rate.