A new state pension system was brought in on 6 April 2016, so most people (men born after 5 April 1951 and women born after 5 April 1953) are eligible for it. The maximum amount is currently £185.15 a week if you have 35 years qualifying National Insurance (NI) years.
So, do you qualify for the maximum, or do you have missing years that will lead to a reduced State Pension? If you do, there are ‘transitional arrangements’ in place to enable those eligible to plug the gap in their NI record going all the way back to 2006.
But … these ‘transitional arrangements’ end on the 5th April 2023 and, when they end, the number of extra years you can purchase drops down to the last six tax years, so checking now is key.
Coinciding with the ‘arrangements’ ceasing, in April 2023, going forward there could be a significant increase (some say up to 10%!) in the State Pension. If you have missing years at that time, if you have pulled down the shade on this window of opportunity, you will miss the chance to enjoy a higher State Pension for the rest of your life.
If eligible, you can buy extra (ie the missing) years by paying Class 3 NI Contributions.
(*) The cost? If you’re eligible, and you could benefit from buying extra years, that process involves paying what are called ‘voluntary class 3 NI contributions’. £15.85 (2022/2023) per missing week of NI contributions, i.e. £824 for a full year (£795.60 for 2020/2021 and £800.80 for 2021/2022 – so cost is slightly lower when buying contributions for those two years).
(*) Different costs apply to the self-employed.
(*) What would you get? The £824 will purchase approximately an extra 1/35th of £185.15 per week. Thus an extra £5.29 per week/£275 per annum for the rest of your life (you will need to live for about 3 years to recoup the cost).
Those eligible, who can afford the extra NI contributions to plug the gap, could substantially increase their pension. The message is … if you think you may be eligible, take advice now – the state pension system can be complicated and there are exceptions and anomalies when it comes to voluntary national insurance contributions.
If you are not yet at state pension age you can check your state pension forecast at https://www.gov.uk/check-state-pension. 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.
If you are already at state pension age you can check your NI record at https://www.gov.uk/check-national-insurance-record. That will show you any national insurance years since 2006 that are ‘incomplete’.
We have set out above what is only a brief summary of some key points that involve quite complex rules. Always take relevant professional advice before taking, or refraining from taking, any action.
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