There can’t be many better sure-fire investments than plugging gaps in your National Insurance record – and the countdown is now on for anyone who has gaps going right back to 2006
Here’s an interesting stat. Just over half of the people currently receiving the new state pension receive the full amount, according to research by Royal London. That’s because so many people have not officially paid the full 35 years’ worth of NI contributions you would need to make – either due to gaps in their NI record or because they have been contracted out.
The gaps in your National Insurance record could be because you were:
- employed but had low earnings
- unemployed and were not claiming benefits
- self-employed but did not pay contributions because of small profits
- living or working outside the UK
Normally, you can only plug gaps going back six years, but (up until 5 April) you have the opportunity to go right back to 2006 – and plugging these gaps can have a huge impact on how much state pension you receive.
Filling gaps in your record for this period will cost you approximately £824 per year (partial years cost less). For each year you fill you will get an extra 1/35th of state pension which works out at around £328. This means that as long as you live more than three years post state pension age you have made your money back – and every year after that you are in profit, making it potentially an exceptional investment.
Moreover, the State Pension is currently linked into the Triple Lock, meaning that it will continue to increase each year by either inflation, average wages or 2.5% – whichever is the highest – helping to retain its value in real terms into the future. This year it is going up by 4.1%, reflecting the average rise in earnings, with someone receiving the full pension getting almost £12,000 a year.
That’s a tidy sum to be guaranteed each year for many people – in fact it is barely below the tax threshold.
So, how do you go about plugging the gaps?
First, check your National Insurance record online at gov.uk to see if you have any gaps.
If you are below state pension age, then can check your state pension forecast and/or contact the Future Pension Centre.
Extra contributions can even be made after you start receiving your pension, so if you are over state pension age, contact The Pension Service.
If you have gaps because you were acting as a carer for a child, remember to check if you qualify for an automatic National Insurance credit during that time. You may be able to not only backdate a claim… but do so for free.
If you do want to plug any gaps, make sure you have all of your information to hand – and bear in mind that any phone lines will be busy in the days and weeks leading up to 5 April so you might need a little patience too!
Also be sure to check that you will be benefiting from plugging the gap – it becomes complicated, for example, around gaps caused by any years contracted out of the state second pension.
More information on voluntary contributions can be found here on the government website: https://www.gov.uk/voluntary-national-insurance-contributions
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