If you are a British national or think you might be entitled to a British state pension because you worked there for a time, it might be worth checking your entitlement. You’ve got less than three months left to make up 18 years of missing contributions, as Luke Staden, founder of Staden Financial Management, explains.

What exactly is the situation?
Anyone who has worked at least three years in the UK or is a UK national has until April 5 this year to top up missed national insurance contributions for missed years all the way back to 2006.

The British state pension requires at least 10 years of NI contributions and to get the most out of it you need 35. It will pay out to you wherever you live in the world and for most countries it will increase in line with or above inflation on a yearly basis.

Most expats assume they haven’t contributed enough for it to be worthwhile or that it will be too expensive. The thing they don’t realise is that paying back missed years will not only give them an income guaranteed by the British government, but it can be done at a bafflingly low price. It doesn’t matter if you never intend to return to the UK, they will still pay pensions overseas.

Who qualifies?
Anyone with a national insurance number who has previously worked in Britain may qualify. If you’ve worked for at least three years in the UK, you can be confident this applies to you.

How much do you have to pay?
Expats can often pay Class 2 contributions to top up missed years they had while they were abroad and Class 3 for missed years while they lived in the UK. Class 2 contributions are cheaper than Class 3 contributions but Class 3 contributions are still a fantastic deal.

Currently the British state pension pays £11,502 per year – if you have paid enough in NI contributions.

For expats, the cost of one full year of Class 2 contributions is £179.50, and Class 3 is £907.40. It does not take a mathematician to work out what a great return these deals offer.

Let’s assume you have five years spent in the UK and can contribute class 2 contributions. To top up five missed years it will cost £897. That £897 takes you to from having no pension to receiving £3,286.28 every year.

You have, of course, always been able to pay six years back voluntary NI contributions, but we are currently coming to the end of a window in which you can pay 18, making it even more worthwhile.

But more than that, due to the ‘triple lock’ rule, the amount you will receive will increase every year by the highest figure of either: 2.5%, the consumer price index, and the average UK wage increase. So at minimum your pension will increase by 2.5% per year. In practice though the increases are larger.

How does it work?
Follow the instructions on the HMRC website, and log in to view your NI record online. This will lead you to a Kafkaesque nightmare trying to reach the future pension service hotline to find out if it is worth you paying voluntary contributions and what it means for your pension. They have no email address to message, they have two phone numbers and both are an exercise in futility.

Keep cool. For some reason, calling the pensions service is a compulsory part of the process. So try, try and try again.

To actually apply to pay, you have to either print out a CF 83 form and mail it directly or apply online. I printed and filled the application then, after it sat on my desk for a week, I applied online instead.

Once you’ve applied the HMRC will write to you via snail mail to confirm whether your application has been approved, which gaps you’re eligible to pay and at which rates, and how to make over the money.

You then have to wait for your NI record to be updated, which also takes a worrying number of months.

It sounds too good to be true
Try doing what I did. I just entered my details into an annuity calculator (changed my age to 66) to find out how much it would cost to get a similar deal to state pension from a private company in the UK. In order to have an income for life at the retirement age adjusting for inflation each year, the equivalent of a full state pension would cost me £216,808 from a private provider.

To achieve an annual income of £328.64 (1 year of additional NI contribution) it would cost £6,194.

So topping up with class 3 contribution costs £907.40 and pays out £328.64 every year. This represents a discount of over 85% to a private annuity. Class 2 contributions cost £179.40 to pay out £328.64 every year, which represents a discount of over 97% compared to a private annuity.

Genuinely, this is the best piece of financial advice I can give this year. I’ve told my British clients for years to apply but I’m always shocked when people tell me their adviser never mentioned anything about this to them.

If I were cynical, I would say it’s because too few advisers look out for their clients actual needs, but the optimist in me thinks they’re probably just incompetent.

Contact Luke Staden of Staden Financial Management to set up a meeting and discuss your particular financial needs or to find out more about Luke’s new webinar devoted to the British state pension top-ups.