MILLIONS of savers have just DAYS left to boost their future state pension payments.
A crucial deadline to fill in gaps in National Insurance (NI) payments is looming on April 5.
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The date will end a temporary extension that allowed people to fill in missing NI years dating back to 2006/2007.
Pensioners require 35 years of qualifying NI contributions to claim the full new state pension, which is worth £221.20 a week.
A minimum of 10 years’ payments are required for savers to receive anything at all.
Life events such as career breaks, time spent abroad, or periods of self-employment with low earnings can result in gaps in NI payments.
This means that making payments to fill in gaps can significantly impact your future income.
Buying one additional year costs £907 and boosts your state pension by £342 every year of retirement.
Or If you fill gaps between 2006/07 and 2015/16, you’ll pay the 2022/23 rates for contributions working out at £824.20 to buy one year of contributions.
This means you can make back the investment cost within three years, and potentially boost pension income by thousands of pounds over the course of your retirement
Overall, you have the potential to enhance future state pension payments by up to £113.76 a week, equating to an annual increase of £5,915.92.
But those with gaps only have a limited time to act as from April 6 retrospective contributions will be restricted to the past six tax years.
Brian Byrnes, head of personal finance at Moneybox, said: “According to findings from the Pensions and Lifetime Savings Association (PLSA), over half of UK savers will fall short of retirement income targets set by the 2005 Pensions Commission.
“With so many people at risk of not saving enough for a comfortable retirement, it’s important that savers are accessing everything they have or are eligible for, whether that’s by finding missing pension pots or filling the gaps in their NI contributions.
“This is why, with just two more weeks left to fill any gaps in NI contributions to top up your state pension, it’s vital for everyone to check what money they have on the table when it comes to their retirement.”
Savers can check how many NI credits they’ve accrued in just minutes on the government’s online ‘Check Your State Pension’ forecasting tool at gov.uk/check-state-pension.
It outlines the options to make voluntary NI contributions to fill them.
Mr Byrnes added: “It’s worthwhile checking ahead of the deadline, as from April 6 you will only be able to make voluntary contributions for the past six qualifying tax years.”
However, buying backdated voluntary contributions won’t be right for everyone.
Mike Ambery, retirement savings director at Standard Life, said: “It’s very important to consider your own situation, as there could be many reasons why voluntary NI contributions wouldn’t suit your circumstances, for example if you have sufficient time to make up the years without making voluntary contributions.
“There’s not a lot of time left, and this is a big decision to make. Checking your record and contacting the relevant people before 5th April could potentially mean you’re thousands of pounds better off in future.
“While the deadline remains in place, there has been some welcome flexibility – those who secure a callback from HMRC before the deadline may still be able to make payments after April 5. That said, acting as soon as possible remains crucial to avoid missing out.”
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you’re self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You’ll usually pay National Insurance Contributions (NICs) when you’re over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 – so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you’re not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don’t need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self-assessment tax return.
Check what you’re owed
If you think you’re missing NI years, the first thing to do is check your State Pension forecast.
You can check this through the government’s ‘Check your State Pension’ tool online at www.gov.uk/check-state-pension.
The tool is also available through the HMRC app, which you can download free on the Apple App Store and Google Play Store.
You’ll need to log in using your Personal Tax Account login details. If you don’t already have an online HMRC account, you can register at gov.uk.
It shows you how much your state pension could increase by and what NI years you’ll need to buy to achieve this.
You’ll then be able to pay for these missing years securely online.
You will need to pay for these in full as you can’t set up a plan to pay in instalments.
Be aware that you can’t use the online service if you’re already receiving your State Pension.
Instead, you’ll need to call the Pension Service on 0800 731 0469.
However, before you commit to buying new NI years it’s vital you check whether you were entitled to free credits at any point.
Check for credits
Before making a voluntary contribution, check if the gaps in your contributions can be filled with free NI credits.
Thousands are thought to be missing out on these NI Credits, leaving them worse off in retirement.
For example, those on certain benefits could qualify for Class 1 credits.
This includes parents with active claims for child benefit.
You can check the full list of people eligible to claim credits by visiting gov.uk/national-insurance-credits/eligibility.
It explains the circumstances where you’ll need to claim and when you’ll get it automatically.
Topping up your missing years
In some cases, buying back missing years can be really valuable.
But earning back the years isn’t free, so your voluntary contributions come at a price.
If you fill gaps between 2006/07 and 2015/16, you’ll pay the 2022/23 rates for contributions.
It is worth £15.85 a week, which means it costs £824.20 to buy one year of contributions.
As the state pension was £185.15 per week in 2022/23, this boost would add £5.29 per week or around £275 per year.
Although you’d have to pay £8,242 (10 lots of £824.20), the annual state pension boost would be around £2,750.
Someone who was retired for 20 years would get back around £55,000 in total (before tax).
Anyone under 73 can make voluntary pension contributions, as it’s assumed everyone under this age will claim the new state pension.
If you’re below the state pension age, you can check your state pension forecast by visiting gov.uk/check-state-pension to determine if you’ll benefit from paying voluntary contributions.
You can also contact the Future Pension Centre by calling 0800 731 0175.
If you’ve reached state pension age, contact the Pension Service to find out if you’ll benefit from voluntary contributions.
You can contact this service in several different ways by visiting gov.uk/contact-pension-service.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 – but it’s due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
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