How new rules could affect your state pension if you live abroad

From April, a sweeping overhaul of National Insurance rules will make it significantly more expensive and, for some, harder to build a UK state pension from abroad.

The changes were announced as part of the November 2025 budget, and will affect UK nationals living and working overseas, although HMRC estimates around 46,000 people currently paying voluntary Class 2 contributions abroad will be directly impacted.

Here Which? explains the upcoming changes, the new costs for workers, and the best alternatives to consider.

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What’s changing and why does it matter?

To get the full rate of the new state pension in the UK, you need 35 years of National Insurance contributions. To get anything at all, you need 10 years. 

From 6 April 2026, workers living abroad will no longer be able to pay Class 2 voluntary National Insurance contributions to build their UK state pension. Instead, they will have to pay Class 3 contributions, which are more expensive. 

It currently costs workers £3.50 per week – or about £182 a year – for Class 2 contributions in the 2025-26 tax year.  

From April 2026, workers must use the Class 3 rate, which for the 2025-26 year, costs £17.75 per week, or £923 per year. For the 2026-27 tax year, the price rises to £18.40 per week, totalling nearly £957 per year.

According to the wealth managers at Skybound Wealth, this change means people living abroad will pay roughly £767 more each year at current rates to maintain their state pension record. Over 10 years, that adds up to more than £7,600 in extra costs, depending on how NI rates change.  

Any contributions you've already made will remain on your record and count toward your state pension. If you are currently paying voluntary Class 2 contributions from abroad, you can still complete your payments for the 2025-26 tax year.

How you pay determines when your final lower-rate contribution is collected:

• If you pay by annual bill – HMRC will send your statement in May 2026.
• If you pay by direct debit – do not cancel it as HMRC will automatically collect your final Class 2 payment on 10 July.

HMRC is writing to workers affected by the change in July 2026 to let them know they cannot pay Class 2 for the 2026-2027 tax year.

• Find out more: state pension age calculator

The new 10-year rule

This isn’t the only change affecting people living abroad.

From the 2026-27 tax year, those living abroad must meet stricter eligibility criteria even to make Class 3 voluntary National Insurance contributions. 

You’ll either need to have lived in the UK for 10 consecutive years or have made 10 years' worth of UK-based NI payments. Previously, this limit was three years. 

However, HMRC guidance does offer an olive branch to certain taxpayers, with the previous three-year limit potentially retained for those who:

• Apply to pay NI voluntary contributions for 2024-25 or 2025-26 on or before 5 April 2026
• Pay those voluntary NI contributions on or before 5 April 2027
• Apply to pay Class 3 NI contribution for 2026-27 on or before 5 April 2027.

HMRC has also confirmed that those already paying Class 3 contributions from abroad do not need to reapply under the new rules.

The government says the changes are designed to ensure that individuals building a state pension from outside the UK have a ‘sufficient link’ to the country. It also argues that the higher Class 3 rate better reflects the value of the benefits paid out.

• Find out more: additional state pension explained

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What happens to your private pension abroad?

If you move abroad, your UK workplace or private pension remains yours and stays invested, but your tax position and banking arrangements may change.

When you begin withdrawing your money – currently from age 55, rising to 57 in 2028 –  you may be taxed by both the UK and your new country unless a double-taxation agreement is in place to provide relief. You can check the government website to see if your new country has a tax agreement and learn how to claim relief.

Additionally, some UK banks may require you to close or change your account if you move overseas permanently, meaning you may need to switch to an international account, which often carries higher fees and minimum balance requirements.

If you move your UK pension to an overseas provider, it will need to be moved to a Qualifying Recognised Overseas Pension Scheme (QROPS). These are international schemes that HMRC has approved because they follow rules similar to the UK’s and report to it directly. 

Typically, UK providers will not allow you to transfer your money to any overseas plan that is not an official QROPS. However, even with an approved scheme, you may still face a 25% tax charge, alongside potentially high setup fees and management costs.

• Find out more: should I top up my state pension?

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How your state pension changes overseas

The state pension will increase by 4.8% due to the triple lock in April 2026. The triple lock guarantees that state pension payments are boosted each year by the highest of inflation, wage growth, or 2.5%.

This year, the full new state pension amount is rising from £230.25 per week to £241.30 (£12,547 a year). Meanwhile, the full old basic state pension is increasing from £176.45 per week to £184.90 per week, taking the full annual amount to £9,614.

However, whether you receive this increase depends on where you live.

The UK state pension is only uprated if you live in the UK, the European Economic Area (EEA), Gibraltar, Switzerland, or certain countries with a social security agreement with the UK, including the United States.

If you live elsewhere, your pension may be frozen at the rate when you first start claiming or when you left the UK.

Popular retirement destinations such as Canada, Australia and New Zealand fall into this category. You can find the full list on the government's website. 

According to the End Frozen Pensions campaign, around 450,000 retirees are affected, and those affected have lost out on over £26,000 in state pension increases over the past 15 years.  

• Find out more: how much will I need to retire?

Who else won’t get the full triple lock increase?

State pensioners who move to certain overseas destinations are not the only people who will miss out on the triple-lock increase this year. Others include: 

• Pensioners with additional state pension If you reached state pension age before April 2016, or if you qualify for an extra 'protected' amount above the flat rate, these additional payments are only increased by the 3.8% inflation rate. Unlike the main state pension, these specific portions are not covered by the triple lock.
• People who defer their state pension Delaying your pension can increase your weekly payments by roughly 5.8% to 10.4% per year, depending on when you reached the pension age. However, this 'extra' boost is excluded from the triple lock and only increases annually in line with inflation.

Find out more: should I defer my state pension?