Financial advisers never tire of
reminding people that they need to save for their retirement throughout their
working lives, but there is one additional thing which everybody should do
before they reach the end of their working lives – and that is to check that
they are going to receive the state pension they are entitled to.
With the triple lock still in
existence, this month saw the full state pension rise to £221.20 a week –
that’s £11,502 a year; for a couple it’s twice that. So ensuring that you will actually receive
the full amount when you finally retire should be something everybody does.
To get the state pension, you need
at least ten qualifying years on your National Insurance record. A qualifying year is one in which you were
working and paying NI contributions; were getting NI credits, for example if
you were unemployed, ill or a parent or carer; or were making voluntary NI
contributions (more on this in a moment).
But ten years won’t get you the
full state pension; to receive that you will need 35 qualifying years on your
NI record. And it’s vital to know just
how many years you have on your record in time to do something about it if you
are falling short.
Fortunately, finding out how many
qualifying years you have accrued is an easy task. There are two ways of doing it: the first and
easiest is to log on to www.gov.uk/check-national-insurance-record. If you don’t have a Government Gateway user
ID and password (which you will need), you can set one up here as well.
For those who are not online, you
can also check by phone on 0300 200 3500, or write requesting a form BR19 to
National Insurance Contributions and Employers Office, HM Revenue &
Customs, BX9 1AN.
What to do if you don’t have 35
years contributions
If it turns out that you won’t have
the full 35 qualifying years by the time you reach state pension age, all is
not lost. You can ‘buy’ extra years by
making voluntary ‘Class 3’ contributions, which allow you to make up any gaps
from the previous six tax years.
There is also a one-off concession
which allows you to make additional voluntary contributions covering the years
April 2006 to April 2016. But this is
only available until 5th April 2025 - just one year away.
The cost of topping up missing
years varies each year; currently it costs just over £900 for each missing
year. This may sound a lot, but the
difference it could make to the eventual state pension you receive (which you
could be relying on for three decades or more) can easily outweigh the initial
cost.
What if you were ‘contracted
out?
Under state pension rules before
2016, you or your workplace or private pension scheme could choose to ‘contract
out’ of the ‘Additional State Pension’ which existed at the time. This meant that some of your NI contributions
were paid into a workplace or private pension.
This might reduce your state pension.
You may still be able to increase
the state pension you receive if you were contracted out, by adding qualifying
years into your National Insurance Record.
The maths here are more complicated, and it’s a good idea to seek advice
if this is the case.
What to do now
If you are in any doubt about your
state pension entitlement, it is very important to seek advice, because getting
it wrong could affect the amount you have to live on for many years after you
retire. Even for those with healthy
private or workplace pensions, the state pension will be an important part of
their income when they stop working – so it’s worth making sure you are getting
the full amount you are entitled to.
