April is shaping up to be an important month for British pensioners living in Spain, and the pension news is a mix of welcome relief and fresh concerns.
On the positive side, the UK state pension will rise by 4.8 percent from April 2026. For most retirees in Spain, this works out at roughly £400 to £575 extra per year, once Spanish tax and exchange rates are taken into account. At a time when everyday costs in continue to climb, that increase will be very welcome.
However, changes announced in the last UK budget could take some of the shine off that good news for many expats.
Pensions for UK expats
The British government has confirmed it will remove access to Class 2 voluntary National Insurance contributions for people living abroad. The aim is to stop expats from building up entitlement to the UK state pension at a lower cost than those living in the UK.
This change is due to take effect from 06 April and comes alongside a tougher rule on eligibility. The minimum period of UK residency or National Insurance contributions needed before paying voluntary contributions will increase to ten years.
Until now, many expats have been able to fill gaps in their National Insurance record by paying Class 2 voluntary contributions. To qualify, you generally needed to have worked in the UK before moving abroad and lived there for at least three years. For many people, this was a relatively affordable way to protect their future pension.
Class 3 contributions
From April, that option will largely disappear. British nationals living overseas will usually only be able to pay Class 3 voluntary contributions, which are significantly more expensive. On top of that, they will need to meet the new ten year residency or contribution requirement before they can pay in at all.
The government has been clear about its intention, saying the change is designed to end what it sees as cheap access to the UK state pension for those expats living abroad.
The announcement has also raised questions around other financial planning issues for expats, including the future use of ISAs while living outside the UK. As a result, some British residents in Spain are already reviewing their long term plans, particularly if they are considering a return to the UK later on.
