A significant overhaul of the state pension system by the Department for Work and Pensions (DWP) is set to strip thousands of people living abroad of their entitlement to full pension payments. The change, announced by Chancellor Rachel Reeves, targets the system of voluntary National Insurance contributions for overseas residents.
End of the "Buy-In" for Overseas Residents
The central reform is the abolition of access to Class 2 voluntary National Insurance contributions (NICs) for individuals residing outside the UK. This system had allowed people with gaps in their UK National Insurance record, often due to living overseas, to make affordable weekly payments to qualify for the British state pension.
In a statement to the House of Commons, Labour Chancellor Rachel Reeves justified the crackdown. "Taxpayers’ money should not be spent on pensions for people abroad who only lived here for a couple of years and may never have paid a penny in tax," she stated. "The Conservatives allowed thousands of people living abroad to buy their way into the state pension for as little as £3.50 a week, debasing the purpose of our pension system."
Stricter Eligibility and Tax Thresholds Frozen
Alongside ending the Class 2 voluntary NICs route, the Chancellor announced a tightening of general eligibility rules. The government will increase the minimum qualifying period of living or working in Britain to ten years. Furthermore, the required contribution amount for those abroad will also rise.
These pension changes were part of a broader fiscal statement delivered in the Autumn Budget. Ms Reeves confirmed a freeze on several key thresholds, stating, "Today, I will maintain all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028."
For pensioners, she outlined a measure to ensure "that people only in receipt of the basic or new state pension do not have to pay small amounts of tax through simple assessment from April 2027." The threshold for Plan 2 student loan repayments will also be held at its 2026/27 level for three years.
Political Reaction and Criticism
The announcement has drawn sharp political criticism. Reform UK leader Nigel Farage launched a fierce attack on the Chancellor ahead of the Budget statement. At a rally in Wales, he declared Ms Reeves "hopelessly out of her depth."
Referencing a nickname coined by Conservative MP Lee Anderson, Mr Farage said, "Rachel from accounts will be up on Wednesday... I think the truth is she was actually Rachel from complaints, not accounts. And I cannot think of a Chancellor of the Exchequer in my lifetime more completely, utterly, hopelessly out of their depth as Rachel Reeves. It is a disaster."
The DWP state pension overhaul marks a decisive shift in policy for overseas claimants, directly impacting thousands who relied on the voluntary contribution system to secure their UK pension rights. The full consequences for affected individuals are now being assessed.
