The window to boost your state pension closing. It snaps firmly shut on July 31 this year, so anyone under the age of 70 should check where they stand as soon as possible. It was due to shut on April 5 but tax office phone lines went in to meltdown so that deadline has been extended, but don't delay, as this process is a little bit tricky and it needs to be done in stages.
The opportunity to boost your pension comes from some of the rules put in place when we moved from the old state pension system to a new flat rate scheme in 2016. As a general rule, in order to qualify for a full state pension, you usually need to have paid enough National Insurance every year for 35 years. This is higher than the 30 years you needed under the old state pension arrangements, so when the change was made, it also introduced a window during which you could buy more extra years. Until the end of the tax year you, can fill the gap for any year you didn’t pay enough NI to qualify – going back to 2006. From July 31, you will only be able fill gaps going back for six years.
Before you do anything else, it’s worth finding out where you stand. You can find the details by searching for state pension summary on the gov.uk website, and it will tell you whether you are forecast to receive the full state pension or not.
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If not, there are a few possible reasons. It may be because you were contracted out of the state second pension before 2016, so your state pension is reduced for each year you were out of the system. In this case, topping up may not help. If you’re in this position, your next step will be to get a bespoke calculation from the government’s Future Pension Centre on 0800 731 0175.
However, alternatively, there could be gaps in your NI contributions. You can search for your NI record on the site to see whether there are any years without full contributions any time since 2006. If there are, you may have the opportunity to buy extra years.
A full year usually costs £824 and adds up to £275 a year to your state pension. It means that if you live for three years after state pension age, it’ll pay off. If you’re doing this after state pension age, you’ll need to live for another three years after buying the extra years to make it worthwhile. It’s not always that simple, because if you’re on a very low income, getting more state pension could reduce your entitlement to pension credit. Meanwhile, if the extra income pushes you into a new tax bracket, there may be more tax to pay on the extra cash, so you may need to live longer to break even.
Before you buy, it’s worth checking whether you can get any tax credits – which give you a year’s worth of NI contributions without charge if you weren’t working for specific reasons – including caring for a young child or being unemployed and actively looking for work. There are more details on the gov.uk website about this too.
Even after you have done all of this, before you part with any cash, you also need to contact the government’s Future Pension Centre go through your specific circumstances and do the calculations. The rules are fiendishly complicated and there’s all sorts of small print, so you need to speak to someone to check it’s right for you.
It’s worth bearing in mind that they will be incredibly busy – especially as the end of the tax year approaches. They’re only open 9-6 Monday to Friday, so you can’t get around it by calling at an anti-social hour, so you need to be patient, and may need to try more than once.
For those under the age of 45, at this stage it will be difficult to know whether you’ll have enough contributions without topping up. However, it’s still worth checking where you stand. You may well decide that a full year isn’t worth the money, but if you’re only a few weeks short of a full year, you may find partial years you can buy for less than £50, which you may decide is worth the risk of paying and then not needing it later.