One simple check which could have a big impact on your pension

29.04.2024
Matthew Harrington
Financial Planning
Matt Harrington

Saving for retirement has never been more important – but checking you will receive the state pension you are entitled to is another vital step, says Matt Harrington of Lovewell Blake Financial Planning.

Matt Harrington

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.

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