Martin Lewis is encouraging people to check their National Insurance record for any gaps which, when filled, could add thousands of pounds to State Pension payments in retirement.
State Pension is a contributory benefit delivered by the Department for Work and Pensions (DWP) which currently provides financial support for over 12.4 million older people across the UK, including 992,052 living in Scotland. However, of that total, there are 10.1 million older people receiving Basic State Pension payments of up to £141.85 per week and 2.4 million getting New State Pension payments, worth up to £185.15 each week.
Worryingly, the latest figures from the DWP show that around 1.5m women and 448,082 men are receiving less than £100 per week in State Pension payments, however, Martin Lewis may have a way to increase that amount.
In the latest edition of the MoneySavingExpert.com newsletter, the award-winning journalist explains how the New State Pension system was introduced on April 6, 2016 and along with the change, some “transitional arrangements” were also put in place, however, according to the founder of the consumer website, these are set to end on April 5, 2023.
As a result, the financial guru is recommending that people check their online State Pension forecast now – well ahead of the deadline – to make sure there are no gaps in their state-funded retirement pots.
And if there are, and they can afford it, to plug those gaps as they will reap the reward in retirement.
Martin explained: “This is all about buying extra ‘national insurance (NI) years’. State pension payouts are based on the number of ‘qualifying NI years’ you have. Most people acquire these while working or when getting NI credits (eg, for bringing up children).
“Until 5 April 2023, you can buy years to plug NI gaps back to 2006. After that, it’s only back six years. When the transitional arrangements end, the number of extra years purchasable drops, so checking now is key.”
He went on to explain how it can be a “lucrative” investment.
Martin said: “For some with the cash, it’ll be very lucrative: each £800 could net a (mostly) inflation-proof £5,800.
“A full voluntary NI year costs £800ish, but could add up to an extra £275 ANNUALLY to your state pension – so the break-even point is hit if you live just three years after getting your pension (or if you’re already getting it, after you top up).”
The MoneySavingExpert.com team have created a new guide explaining the whole process, which you can read in full here.
Here is everything you need to know about National Insurance credits and how to maximise your State Pension payments.
What is the State Pension age?
In October 2020, the UK Government raised the State Pension age to 66 for both men and women with plans to increase this to 68 over the coming years.
But, how many years of NI contributions do you need to make in order to qualify for the full, ‘new’ State Pension?
You will need at least 10 qualifying years on your NI record to get any State Pension and they don’t have to be 10 qualifying years in a row.
This means for 10 years at least one or more of the following applied to you:
If you have lived or worked abroad you might still be able to get some new State Pension.
You might also qualify if you have paid married women’s or widow’s reduced rate contributions – find out more about this on the GOV.UK website here.
You will need 35 qualifying years to receive the new full State Pension if you do not have a NI record before 6 April 2016.
For people who have contributed between 10 and 35 years, they are entitled to a portion of the new State Pension.
Qualifying years if you are working
When you’re working you pay NI and get a qualifying year if:
You might not pay NI contributions because you’re earning less than £190 a week. You may still get a qualifying year if you earn between £123 and £190 a week from one employer.
Qualifying years if you are not working
You may get NI credits if you cannot work – for example because of illness or disability, or if you’re a carer or you’re unemployed.
You can get NI credits if you:
claim Child Benefit for a child under 12 (or under 16 before 2010)
get Jobseeker’s Allowance or Employment and Support Allowance
receive Carer’s Allowance
If you are not working or getting NI credits
You might be able to pay voluntary NI contributions if you’re not in one of these groups but want to increase your State Pension amount. Find out more on the GOV.UK website here.
What if there are gaps in your NI record?
You can have gaps in your NI record and still get the full new State Pension.
You can get a State Pension statement which will tell you how much State Pension you may get. You can then apply for a NI statement from HM Revenue and Customs (HMRC) to check if your record has gaps.
If you have gaps in your NI record that would prevent you from getting the full new State Pension, you may be able to:
Check your National Insurance record here.
Check your State Pension forecast
Go online and check your State Pension entitlement on the ‘Check your State Pension forecast’ page on the GOV.UK website here.
This will also tell you your State Pension age – when you can officially retire and start collecting payments.
Check your State Pension age
Check your State Pension age using the free Gov.uk online tool here.
This will tell you:
- when you will reach State Pension age
- your Pension Credit qualifying age
To keep up to date with the latest pension news, join our Money Saving Scotland Facebook group here, follow Record Money on Twitter here, or subscribe to our twice weekly newsletter here.