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I am a 39 year old British citizen. For the next year, possibly longer, I will be living and working in Thailand. I have a working visa, will be working for a Thai company and will be paying local tax, so I will not be UK tax resident during this time. I do have a property I rent out, so will continue to pay tax on that. I am trying to determine if I should/can continue paying National Insurance contributions to protect my state pension.

According the HMRC my National Insurance contributions are as follows

  • 13 years of full contributions
  • 28 years to contribute before 5 April 2048
  • 11 years when you did not contribute enough (4 years higher education, 7 years working abroad)

I will speak to HMRC this week to find out my obligations. However, if I am not obligated, would I be better off to continue NI contributions or to put the money into something like a Vanguard Personal Pension (SIPP)? There will be no contributions from my employer during my time away, so I want to put my money where it will yield the best returns.

Apologies if this is an obvious question, I've spent much of my life as staff rather than self-employed and have paid very little attention to tax and pension. I'm a bit late to the game at this point, but trying to get my house in order as best as I can. Any advice or suggested reading from the more finance savvy would be really appreciated.

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The simple answer is 'no', but possibly 'maybe'. You can pay voluntary contributions.

These are £158.60/year for Class 2, and £795.60/year for Class 3.

Eligibility for Class 2 is:

  • you are working abroad
  • you were working in the UK immediately before that
  • you have paid NICs in the UK or lived in the UK for 3 years continuously

and for Class 3:

  • you are living abroad, either working or not
  • you've ever lived in the UK for 3 consecutive years

This will count towards your 28 years, but so will most forms of self-employment and employment in the UK. At this point you need to pay 15 years out of the next 27 or 28 to get your full pension (which is not uprated with inflation if you are living abroad, unless you live in a country with a bilateral social security agreement such as the Philippines).

You might be able to pay up some of your partial years more cheaply than the £158.60/year; you'd need to check but essentially you can only pay back the past 6 years. These will be the more expensive Class 3 contributions.

So the Class 2s might be attractive, Class 3 certainly is not at this point, but it depends on your future work plans - pension payments into a SIPP will buy you future income, but voluntary NICs only have value if you don't otherwise meet your 28 years, which depends on your future plans.

You can pay into an ISA for the tax year that you left the UK, but after that you cannot. An ISA is generally more attractive since you are not receiving any kind of tax relief on the SIPP contributions, which is what normally makes them attractive (SIPP contributions can continue at £3k/year for 3 years after laving the UK). You should max out the £20k into a share ISA, which without tax relief on the SIPP contributions, is certainly preferable as SIPP income is taxable whereas ISA income is not. When you become ineligible for the ISA in the next tax year, you might invest in single-priced funds with low/minimal buy/sell costs outside the ISA wrapper; when you move back to the UK you can sell these outside the ISA and then re-buy them within the ISA wrapper to benefit from tax relief. The SIPP has the disadvantages of all pensions, i.e. it is subject to restrictions on how you spend it, which you don't suffer with ISA or shares/cash outside an ISA.

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