Social Security Pensions – International

It is not unusual in the global workplace for you to have worked in more than one country. While this may lead to some confusion when considering tax issues, a person’s social security position can be more complex by living, working, and paying social security in several countries.

Many countries have entered into agreements covering social security. These deal with the issues of an internationally mobile worker and are the social security equivalent of a Double Taxation Agreement. They deal with both the liability to social security and the entitlement to social security benefits in the context of the international worker.

When considering the social security pension from any country, there are two questions that need to be addressed. Am I entitled to a social security pension? And, if yes, how much?

The entitlement question is relatively easy, most countries require a minimum period of social security contributions (10 years is common (UK, France, the US)). You will qualify for entitlement to a pension if you meet the minimum period of coverage.

Having met the criteria for entitlement, the amount of pension will depend upon each country’s individual scheme. The criteria will be the length of the contribution period, the amount of contributions and a person’s income level.

Social security agreements will almost always deal with your entitlement to a social security pension and not the amount paid. These bilateral agreements will often allow you to consolidate periods of contributions in each country when determining your entitlement to a pension.

For example, 6 years of US contributions and 6 years of UK contributions will not, on their own, provide entitlement to a retirement pension, but the UK/US Agreement allows the periods in both countries to be consolidated for this purpose. This gives 12 years of coverage, and you meet the qualification criteria in the UK and the US. I would add that there is also a minimum period of coverage required in both the UK and US of 18 months, less than 18 months and you will not qualify for social security pension from either country.  

At this point, it is not possible to transfer benefits from one country to the other, this will never happen. These schemes differ so much and are not equivalent to a “money purchase” pension arrangement where you have an identifiable “pot” of money for your retirement (however, these do exist around the world and are often described as Provident Schemes).

If you are approaching retirement, what action, if any, should you be considering if you have paid social security contributions to more than one country?

  • Check your entitlement to a pension in each country. If you don’t meet the criteria under their domestic rules, check on the international aspects. You will likely have to inform them that you had periods of coverage elsewhere for them to consider your entitlement under any international agreement.
  • Can you make a “catch-up” payment? For example, the UK allow you to make voluntary Class 3 National Insurance Contributions to fill gaps in your contribution record.
  • Claim the benefit. They probably won’t pay you anything if you don’t ask.

Most countries have online tools where you can deal with some of these issues. They may also be able to provide you with projections of retirement benefits that you may be due.

Check your UK state pension forecast here and US Social Security benefits here.

This note attempts to provide basic guidance on the availability of social security pensions. Please be advised that PJD Tax are not specialised in this area and expert advice should be sought if you believe that the information below is relevant to you.