By Frank Conway
A few weeks ago, I was assisting a client on their UK pension buyback questions. Having worked in the UK for 13 years, they now wanted to buy back extra years. This would give them a higher monthly pension amount.
At first, it seemed they had no paperwork prepared, and were unfamiliar with the entire process.
With the April deadline fast approaching, time was running out to get their application in.
But as we chatted, I began to suspect some prep work was already done. There were a few clues. The client mentioned a letter. Some figures about a buyback. They also referred to a yearly buyback amount of Stg£800 per year.
I encouraged them to search their files and low-and-behold, they had received a buyback cost from the UK authorities.
The buyback cost was about £13,500. This would deliver about an extra £4,600 per year. The individual was being categorized as Class 3. This meant the cost per year of buyback was about £824.20.
But the contribution class didn’t seem right. They had worked as a regular employee.
Another piece of good news followed.
They contacted the UK authorities to query their contribution class. It turned out they were were Class 2 after all.
This resulted in the buyback cost per year falling from £824.20 to £163.80. So the total buy back cost fell to just a few thousand UK Pounds.
The benefits to the client was immediate. The total cost of the buyback would pay for itself in 6 months.
This was a fairly typical case of financial confidence. The client was unsure of the process, even after they received their buyback confirmation from the UK authorities. Plus, there was a budget factor, they didn’t have the £13,500. But the most critical factor was engagement with the UK authorities on the contribution class. A simple query turned the entire process in favour of the client. Now they can enjoy a far higher annual pension when they retire in a few years time.
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