At the time of writing there are just a few weeks left to secure yourself a State Pension boost.
When the new State Pension system was launched in 2016 transitional rules were put in place. This allows people to sort out gaps in their National Insurance record going all the way back to 2006.
From the 6th April 2023 you will only be able to go back and top up gaps from the last six years.
It’s usually a really good deal if you can top up your State Pension so it’s vital you find out where you stand and what you need to do.
How a State Pension boost works
You will receive the full new State Pension if you have 35 years of full qualifying National Insurance credits.
‘Full’ is the key word here as many people I meet have worked and paid National Insurance for far longer than 35 years but are still not forecasted to get the maximum State Pension.
There are many reasons for this. It could be that you:
- Took a career break.
- Were on low pay.
- Took time out to look after children or grandchildren.
- Worked abroad.
The best place to start is to look at your State Pension forecast which can be done online. You need to look at the forecast carefully as the headline figure will be the State Pension you are forecasted to get if you carry on working and achieve the full 35 qualifying years. It doesn’t mean you already qualify for the maximum.
You will need to look under the headline figure where it will tell you how many years you are short.
If you are short and are already retired or planning to retire soon then you will need to check your National Insurance record to see where the gaps are. If you find a year where there is a gap you can click and expand the row and it will tell you how much you can pay now to complete that particular year.
Before paying any voluntary National Insurance contributions to plug your gaps it’s worth checking to see if you qualify for any National Insurance credits.
You may be able to claim credits for:
- Times when you were ill.
- Caring for someone.
- Looking after a child.
If you don’t qualify for any credits than you can make a one off payment now to secure extra State Pension. Each full year of National Insurance is worth an extra £275 a year for the rest of your life in State Pension income.
For gaps between 2006 and 2017 time is running out to do a last minute State Pension boost. After 6th April 2023 you will only be able to plug the gaps for the last six years.
The interesting thing to remember with gaps is that they can be big gaps or small gaps. So you may find there was a year where you didn’t pay any National Insurance at all. You may also find that there are some years where you paid some National Insurance for the year but you are just a tiny bit short.
Frustratingly if you are short a year by the tiniest of margins it counts as one whole year short.
The good news is that it may only take a tiny payment to make up the partial year. So it’s always best to go back through your record and top up the years that cost the least first.
Why you should do a State Pension boost
Now it may be that you are still working and some years away from your State Pension age.
If this is the case and you are still planning to carry on working then you may make up the extra years you require by carrying on with work.
However it might still be worth checking those gaps to see if there are any where the contribution to fill it up is tiny. This might just keep your options open if you wanted to retire early.
If you do have gaps and are considering making a voluntary National insurance to fill it up then it’s usually a good deal to do a State Pension boost.
Even to pay for a full year at today’s rates it will cost a one-off payment of around £800. This will buy you £275 a year of extra State Pension for the rest of your life. The State Pension is currently inflation proofed as well.
You would only need to survive just under three years after State Pension age to get your money back. If you lived for 20 years after State Pension age then you would get back £5,500 for that one-off £800 payment before any inflation increases were factored in.
The deal only gets better the smaller the top up payment required.
If you would like a personal projection done for your own position then you should contact the Future Pension Centre.
If you are not sure what to do with your personal and workplace pensions at retirement then please get in touch for a free no obligation 15-minute call. We would be happy to review your position, explain where you stand and what you need to do to get the outcome you desire. We have created hundreds of happy retirements over the years. This could be you too.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
