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To obtain a full state pension upon retiring, individuals need to have built up a required 35 years of NI contributions. Those missing the full 35 years of contributions face receiving a reduced State Pension when retiring.
For those who have not got this number of years in full, it is possible to purchase NI voluntary pension contributions to bring them up the full quota of 35 years needed to obtain a full State Pension.
There are only a few months left to top up your State Pension before rule changes in July mean this will no longer be possible.
If you have gaps in your National Insurance (NI) record, you may be able to plug them by paying voluntary NI contributions. The transitional arrangements end on 31 July 2023.
It costs £15.85 to buy one week’s worth of Class 3 NI, or £824.20 per year. Increasing your entitlement to the new State Pension by one year can result in an income boost of £5.29 per week or £275.08 per year.
If you have had gaps in employment due to caring for children or elderly relatives, you may be entitled to NI credits, which give you the same entitlement to the State Pension as voluntary NI contributions at no cost.
It is also important to note that your State Pension will count towards your income tax bill, and increasing the value of your State Pension may push you into a higher income tax bracket, which will affect the benefit of buying extra State Pension years. Therefore, it is recommended that you think through the financial implications carefully and seek the advice of a regulated financial adviser if necessary.
If you need help with pension matters, get in touch today.