You may have been wondering what exactly state pension is and how you get full access to it. Hopefully this can shed some light on the subject.
The full amount of the State Pension is £203.85 per week. How much you receive of this is dependent on the amount of full National Insurance contribution years you have accumulated over your working life. Most people collect full years through working and paying NI, but you can also contribute to your years through certain benefits, or by caring for others. On average, you need 35 full years of contributions to get the full amount of state pension.
You only have until the 31st of July to buy back any missing National Insurance years from 2006. After this date, you will only be able to fill in gaps from the last six years. This can be incredibly lucrative. You may only have small gaps in your NI record and if these contribution years are completed it would mean that a small cost now can provide you with a larger amount each year from your State Pension.
If you do not have the full amount of NI contributions, now is the time to act! Firstly, check your State Pension Forecast and National Insurance Record on the Government Gateway. If there are gaps, consider how you might top them up. Are there any transferable NI contributions from a time you were looking after a grandchild? Or a parent with Carer’s Allowance? Were you on statutory sick pay? These are free, transferable credits that could add to your total contribution years. If this does not apply to you, then you can look at buying the missing contributions.
Buying a full year of NICs costs £824.00 (a partial year can be much less) and can add £275.00 each year to your pre-tax state pension. That means that if you live at least three years into your retirement, you have made your money back.
Each person will have slightly different circumstances so it is a personal choice as to what to do, but if you look at your options then you will be in a better place to make an informed decision.
An important thing to note is that if you were ‘contracted out’ (more common in the public sector), then topping up may not be the best option – a call to the Department for Work and Pensions (DWP) or HMRC will give you a clearer picture.
