The clock is starting to tick as the extended deadline to plug gaps in state pensions is now just six weeks away.
The Department of Work and Pensions (DWP) extended the last date to buy voluntary National Insurance (NI) payments after a campaign to urge the public to check their pension entitlement led to queues on the phone lines as people scrambled to act before the original April 5 deadline. The cut-off date was extended until July 31 to give people more time to ensure they get the full state pension when they retire.
The new state pension was introduced on April 6, 2016 and as part of the "transitional arrangements", taxpayers have been able to make voluntary contributions to make up for any incomplete years in their NI record between April 2006 and April 2016. After July 31, you will only be able to go back six years, so from August, you will only be able to go back to 2017.
Read more: Experts warn that workers may have to wait until they are 74 before they get state pension
And experts are urging the public to pay voluntary NI contributions to receive the full new state pension of £203.85 per week. To get this, you need to have at least 35 years of contributions on your record, and according to Martin Lewis, paying voluntary contributions reasons could turn out to be "incredibly lucrative" for 45-70 year olds. "Many can spend £800 or less (on contributions) and get £5,500 back," he said.
Here's everything you need to know about the scheme:
What is National Insurance?
National Insurance (NI) contributions are a tax on earnings and self-employed profits paid by employees, employers and the self-employed. They can help to build your entitlement to certain benefits, such as the State Pension and Maternity Allowance. You collect NI through working and paying it from your wages - you can also claim them if you are on benefits.
How many NI contributions years do I need?
Currently, most people need 35 years of full NI years to get the full state pension so if you do not have this you will get less money when you reach state pension age. But this does not need to be 35 consecutive years. To qualify for any state pension at all, you need 10 years of contributions.
Why might you have a gap?
You may have gaps or part years in your NI record for a number of reasons, such as if you were a low earner and did not pay NI or if you were unemployed but not claiming benefits. Those who were self-employed or worked abroad may also have gaps in their record.
How to check if you're missing NI years
You can check your state pension summary on Gov.uk. Just fill in your details and it will tell you whether your pension is forecast to be at the full state pension level. You can also check your NI record on Gov.uk.
Check if you're due free NI credits
You may be able to get missing years back without paying for them if for example, if you were a carer, you had childcare responsibilities or an illness which prevented you working for a time. Check in the National Insurance credits section of Gov.uk
How much does it cost to buy back missing years?
If you can't get your missing years made up for nothing, you can buy them.
For most people, the cost to make up a full year is:
- £824.20 for gaps between 2006/07 to 2019/20
- £795.60 for gaps between 2020/21
- £800.80 for gaps between 2021/22
How do I check for missing years?
Before you pay for any voluntary contributions, check your state pension forecast by using the online "Check your State Pension" forecasting tool on Gov.uk, by calling the Future Pensions hotline, or by post by completing a BR19 form.
You will need a Government Gateway account to check your forecast online. Your forecast will tell you exactly how much money you will be paid in retirement, both for your current and projected level of contributions.
Your forecast will show you which years are not full and they will be marked as "Year is not full", but before you make any contributions you should consider whether it is worth topping up - for example, will you live long enough to benefit from topping up, will topping it up push you into a higher tax bracket when you get the state pension, and if you have time to make up the losses before you reach 66.
Are you worried about making ends meet when you retire? Join in the conversation below
How do I pay?
Contact the free Future Pension Centre on 0800 731 0175 before buying any NI contributions to check if you'd benefit from plugging any gaps in your NI record. If you're already at state pension age, contact the free Pension Service helpline on 0800 731 0469.
If you are making a one-off payment and have decided how many years to top up and which ones exactly, you will need to contact HMRC National Insurance helpline on 0300 200 3500. to find out the cost and get the 18-digit reference number you need to actually make a payment..
Once you have the 18-digit number, paying for the missed years can be done by online bank transfer, from a bank at your bank or building society or by cheque to HMRC. You can find out how to pay here.
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