Are you aged between 45 and 70? You may be able to turn £800 into £5,500 in your state pension, Helen explains how…
There is an urgent decision anyone aged 45 to 70 needs to make. Transitional arrangements for buying missing national insurance years from 2006 to 2016 end on 31 July 2023 (this is an extension from the previous deadline of 5 April). This can be incredibly lucrative, for example many can spend £800 or less and get £5,500 back.
Important: This guide is for men born after 5 April 1951 and women born after 5 April 1953.
A new state pension system was brought in on 6 April 2016, so most people roughly 70 or under are eligible for it. The maximum amount is currently £185.15 a week, but how much you’ll get depends on how many ‘qualifying’ national insurance (NI) years you have.
Many will likely need about 35 full qualifying NI years, though for those who started their NI record before 2016 it’s not quite that simple. How many years you need is based on your age and NI record up to now – which could mean you need more than 40 NI years.
To make it easier for people on the new system to collect the number of full NI years they need to get the maximum amount of state pension, there are ‘transitional arrangements‘ in place. These mean you can pay to plug gaps in your NI record dating all the way back to 2006. This arrangement ends on 31 July2023, after which you can only fill gaps going back six tax years.
For some who qualify and have the cash, paying to plug NI gaps could boost your pension by £1,000s.
Check How Much State Pension You’re Forecasted to Get
The first check you need to do is simple, but it’s a different check depending on your age:
If you’re not yet at state pension age…
You need to use the Government’s State pension forecast calculator.
This will give you two pieces of information:
– How much state pension you’ll get based on your national insurance (NI) record to date.
– How much state pension you’re likely to get if you work up to your state pension age.
If you’re not predicted to get the full amount of £185.15 a week, you need to check for gaps in your NI record. There’s a link in your forecast to do this.
Why Do You Have Gaps in your National Insurance Record?
You may get gaps in your record if you do not pay National Insurance or do not get National Insurance credits. This could be because you were:
- Employed but had low earnings
- Unemployed and were not claiming benefits
- Self-employed but did not pay contributions because of small profits
- Living or working outside the UK
Gaps can mean you will not have enough years of National Insurance contributions to either:
- Get the Full State Pension
- Qualify for selected benefits
How Can I Check If I Have Gaps?
Check your National Insurance record to find out:
- If you have any gaps
- If you’re eligible to pay voluntary contributions
- How much it will cost
Contact HM Revenue and Customs (HMRC) if you think your National Insurance record is wrong.
Decide If You Want to Pay Voluntary Contributions
Voluntary contributions do not always increase your State Pension.
You may want to pay voluntary contributions because:
- You’re close to State Pension age and do not have enough qualifying years to get the full State Pension
- You know you will not be able to get the qualifying years you need to get the full State Pension during your working life
- You’re self-employed, file Self Assessment Tax Returns and do not have to pay Class 2 contributions because you have low profits
Self Employed People – Which Jobs May Explain Gaps in Your NI Contributions
Some people do not pay Class 2 contributions through Self Assessment, but may want to pay voluntary contributions. These are:
- Examiners, moderators, invigilators and people who set exam questions
- People who run businesses involving land or property
- Ministers of religion who do not receive a salary or stipend
- People who make investments for themselves or others – but not as a business and without getting a fee or commission
Need Some Advice?
Whilst we cannot speak to HMRC on your behalf regarding your personal tax or National Insurance contributions, we would be happy to help you navigate those conversations.
Contact us for a chat in confidence.