AIBU to think claiming two state pensions seems unethical?

[CoffeeAndCats3]

I wrote about this on another thread, but thought I'd start my own as it irks me and I'm wondering if IABU.

My parents emigrated from the UK in their early/mid thirties and have never lived in the UK since. They are now late 60's. My Mum told me recently that both her and my Dad are claiming a full UK pension, in addition to a full pension in the country them emigrated to. They don't need this money, but she seemed quite smug about how they can 'double dip' and live the Life of Riley while sitting on a load of money, rental properties etc. I told her it seemed a bit unethical to me, but she didn't understand my viewpoint at all.

How is this possible? She said that they only had to pay their (national insurance?) for a period of time after moving, to then be eligible for the full UK pension on retirement? Can someone explain to me if this is correct, as I half think they've scammed the UK system somehow!

Good for them!
Why aren't you pleased for them, if they can have a comfortable old age and not rely on you isn't that a nice thing?

The reason why the state pension is underfunded and old people are living in horrible poverty is not because of pensioners, it is because of complete mismanagement by a dozen or more governments

FROM GEMINI

It is completely understandable why this looks sketchy from the outside, but you can reassure yourself: your parents haven't scammed the system. What they’ve done is entirely legal, highly publicized in expat circles, and actually a fully sanctioned HMRC mechanism.

They are capitalizing on a system called Voluntary National Insurance (NI) Contributions from abroad. Here is exactly how it works and why they are allowed to "double dip."

1. The Low-Cost Loophole: Voluntary NI Contributions

To get a full UK State Pension, a person generally needs 35 qualifying years of National Insurance contributions. When your parents emigrated in their thirties, they probably only had about 10 to 15 years built up. Normally, leaving the UK would mean their UK pension would be frozen at a tiny fraction of the full amount. However, the UK government allows expats to plug the gaps in their records by paying voluntary contributions while living and working overseas. For decades, if an expat was working abroad, they qualified for Class 2 Voluntary Contributions.

• The Cost: It was astonishingly cheap—about £3.50 a week, or roughly £182 a year to buy a full qualifying year of the UK pension.
• The Return: For just £182 paid, they bought an extra year of pension that pays out several hundred pounds every single year in retirement.

By setting up a direct debit to HMRC from overseas and paying this small annual fee for 20 years or so, they legally built their UK record up to the full 35 years. (Note: The UK government actually tightened the rules on this, eliminating the cheap Class 2 option for overseas residents, but anyone who already utilized it over the last few decades locked in their full entitlement legally).

1. Why "Double Dipping" is Allowed

Pension systems are not mutually exclusive. Your parents paid into two entirely separate systems:

1. In the UK: They secured a pension by maintaining their National Insurance record out of their own pockets via voluntary payments.
2. In their new country: They earned a local pension by living, working, and paying income taxes/social security there for 30+ years.

Because they fulfilled the legal criteria for both independent systems, they are legally entitled to collect both. It isn't welfare or a means-tested benefit; it’s a state retirement fund they technically paid to participate in.
A Quick Reality Check on the "Life of Riley"
While they might feel quite smug about it now, there is a catch depending on where they moved. If your parents emigrated to a country like Australia, Canada, or New Zealand, the UK government freezes their state pension. This means they will receive the exact dollar amount they qualified for at retirement age, but it will never increase with inflation. Over a 20-year retirement, the real-world purchasing power of that UK pension will steadily shrink.
So, while it definitely feels a bit cheeky—especially since they don't strictly need the cash and have rental income—they didn't pull a fast one on the taxman. They just filled out Form CF83, paid their dues to HMRC every year while living abroad, and the system worked exactly as it was designed to do!

No one’s saying it’s illegal, they’re pointing out it’s an immoral loophole which, at a time when the conversation is largely centred around the emptiness of the state’s public purse, it should be illegal.

What "mmoral loophole" are you referring to? If it's the lawful state of affairs regarding NI top-op contributions from overseas the OP's parents benefited from, then it no longer exists, as has been pointed out by several posters several times.

The voluntary contribution to top up your years paid is nearer £900 per year not £200.

Thanks, but I think we're all capable of doing our own googling.

You do know that legal is not the same as moral right? That they are two different words with two different meanings?

Well OP @CoffeeAndCats3 , once they are dead you will be able to address this terrible moral inequality, won’t you? If your parents work abroad and are able to afford to pay voluntary NICs, I surmise they will be well off. So when you get your lovely inheritance, you can ensure you don’t avoid any inheritance tax and could return the cost of their SPs to HMT. That will make you feel better, so will you do that? I’m sure AI can easily assess the cost of an indexed 2xSP for you.

I cannot get frothy at the mouth about this. If those who do look at the numbers, they are relatively small in the scheme of many trillions in Gvt, or even the welfare spend. As PP said the closed loophole affects only 46000 people. UK nationals who have lived and worked abroad all their lives but voluntarily paid NICs is a small group. There are more impactful, widespread and fruitful avenues of welfare reform much more worth a froth.

All voted for by many of those same pensioners.

Quite. Amazing how many on this thread seem to think legal = ethically fine.

Clearly the Op hasn't googled though, has she?

Exactly. I paid voluntary class three contributions when I lived overseas- think it was about £600 per year when I moved in 1995.

Clearly the OP was not talking about whether it was legal.

She doesn’t need to google to know it’s perfectly legal but morally doesn’t sit well with her 🙄.

It’s an immoral loophole which is exactly why restrictions on it started to tighten. It’s still unethical in the eyes of the majority of the population.

Again, I’ve already stated, something can be legal and immoral/ unethical based on cultural norms. Like the many tax loopholes which exist for a few to game the system while lower earners largely on PAYE pay a larger portion of their income in tax.

Which is still a tiny fraction of what will be received.

Why not? Not sure what your google has told OP that she didn’t already know.

That doesn’t happen, nobody gets a full pension by only paying in for ten years ! Ten years ( it used to be 3 ) allows you to ( in some cases only, you can’t pay further back than 2006 or after your retiring age) pay the extra years needed to qualify. Ten years without further contributions would get you a percentage of the state pension not a full pension.

Of course.

Ok, even at 35 years of a few hundred pounds contribution, the point remains the same.

Why be so bitter and twisted about your own parents. How do their finances affect you personally.

Class 2 are much less. This year it is £185.50 (I'm sat looking at the letter now. it's on my 'to do' list!)

That wasn't the question I asked. I wanted to know which so-called "loophole" you were referring to.

Well then surely the fact that most people claiming a UK pension are based in the UK and spending it in the UK should be enough? If only “most” people in a demographic need to doing something then it’s the same for pensioners surely?

You also can’t really use the reasoning that if someone has children that’s enough to contribute enough to cover themselves. What if their parents also didn’t work so their children didn’t cover them. And then the children of this generation have may also not work so will you say the same about their children? Just hope that at some point one generation of children will work? But it will never cover the decades of previous generations will it?

I have a friend who had her first child at 20. She hasn’t worked since and is now 44. Her youngest is 4. Her oldest now also has a child and is not working. At what point will this family pay enough to cover themselves? Or are you saying the fact they spend their benefit money here is enough to do that? If so, why do I have to pay tax and NI?? Surely me spending my wages is enough to pay that??

Indeed. Which I why I did it- it’s an excellent investment.