BRITISH pensioners living in Spain will benefit from a generous increase of nearly five per cent to the state pension, with the rise set to come into effect later this year.
From April, the state pension will shoot up by 4.8 per cent – representing an annual increase of over £500 (€580) for most retirees.
The new flat-rate state pension for those who reached pension age after April 2016 will be boosted to £241.30 a week from £230.25.
For British expats who reached retirement age before April 2016, the old basic state pension will rise to £184.90 per week from £176.45.
Pensioners can thank the triple lock system for the boost, which sees the state pension increase by inflation, wage growth or 2.5 per cent, depending on which is highest.
But it’s not all good news for retirees with the Labour government saying it will close a loophole and ‘put an end to those living abroad being able to buy cheap access to a UK state pension’.
Following an announcement by chancellor Rachel Reeves at last autumn’s Budget, British expats will be blocked from topping up their UK state pension via class 2 voluntary National Insurance contributions (NICs).
Under existing rules, UK expats living abroad can opt to pay voluntary NICs to top up missing years on their state pension.
To qualify, you simply need to have lived in the UK for at least three years and worked either as an employee or self-employed before leaving.
At the moment, there are two ways of topping up.
Class 3 voluntary NICs cost £17.75 per week or £923 to buy back a full year of state pension entitlement.
Alternatively, cheaper class 2 voluntary NICs allow expats to make up a full year of state pension entitlement for the small price of just £3.45 per week.
But from April, UK nationals living abroad will only be able to pay into their pot using the more expansive class 3 voluntary NICs.
Eligibility to class 3 voluntary NICs will also be tightened, with access restricted from the 2026/27 tax year to those who have lived in the UK or made NI contributions for at least ten years, instead of the current three.
Over 290,000 Brits are currently registered as living in Spain – many of whom are pensioners.
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