Planning for retirement is one of the most important steps you can take in life. One key component of your retirement income in the UK is the State Pension. However, to maximize your State Pension benefits, you must have enough qualifying years of National Insurance (NI) contributions. If you’ve had gaps in your contributions, you might face a shortfall in your State Pension. But don’t worry! You can make up for these missing years. Let’s break it down for you.
What is the State Pension?
The State Pension is a regular payment from the government that you receive once you reach State Pension age. Your eligibility and the amount you receive depend on your National Insurance record.
How Many Qualifying Years Do You Need?
To get the full new State Pension, you need 35 qualifying years of National Insurance contributions or credits. If you have fewer than 35 years, your State Pension will be proportionally reduced, and you must have at least 10 years to get any State Pension at all.
Why Check Your National Insurance Record Now?
There are various reasons why you might have gaps in your National Insurance record, including periods of unemployment, self-employment with low earnings, living abroad, or caring responsibilities.
Checking your National Insurance record is crucial because you have a unique opportunity until April 2025 to fill in gaps going back as far as 2006. After April 2025, you will only be able to make voluntary contributions for the past six years. This window allows you to maximize your State Pension by making voluntary contributions for those missing years.
Claiming Child Benefit to Fill Gaps
One significant way to fill gaps in your National Insurance record is by claiming Child Benefit. If you are a parent or guardian and responsible for a child under 12, you can receive NI credits that count towards your State Pension, even if you’re not working or earning below the threshold. This is a valuable benefit that ensures you don’t lose out on State Pension entitlement while taking time off to care for your children.
Claiming child benefit as a couple may still be beneficial even if you will need to repay it in full due to meeting the earnings threshold; read our previous blog here for more information on this:
Steps to Take
- Check Your National Insurance Record: Visit the GOV.UK website and access your personal tax account to see your NI record and identify any gaps.
- Decide Which Years to Top Up: Prioritize the most recent years first, as these are often cheaper to top up.
- Make Voluntary Contributions: You can make Class 3 National Insurance contributions to fill the gaps. For the 2023/24 tax year, it costs £17.45 per week.
Benefits of Filling Gaps
By filling in these gaps, you can significantly increase your State Pension payments, providing greater financial security in retirement.
Important Deadline
You have until April 2025 to make voluntary contributions for gaps going back to 2006. After this date, you will only be able to fill gaps for the past six years. This is a rare opportunity to boost your retirement income, so don’t miss out!
Let Inca Review Your Position
Ensuring your personal and business finances are as tax efficient as possible is important. If you’d like help or guidance, get in touch with Inca Accountants today.
Contact one of our advisors today for an initial discussion. Call us on 01235 868888 or email us at [email protected].
