Act now to plug NI gaps before April rule change
BRITONS hoping to plug a state pension shortfall by making voluntary Class 3 National Insurance contributions must act fast to beat this year’s April 5 deadline.
Buying extra state pension can deliver an impressive return, as a 66-year-old who bought just one extra year would pay £824.20 but receive £4,950 if they live to age 84.
To receive the full new state pension, everyone needs to have made 35 years of NI contributions, which most do automatically while working.
Some end up with gaps after taking time off to raise a family or care for loved ones. Others fall short due to illness and disability, low incomes or working abroad.
Men born after April 5, 1951 and women born after April 5, 1953, can fill gaps going back to 2006, said Jon Orchard, chartered financial planner at adviser Old Mill: “They must act before April 5, after that date they can only top up the last six years.”
Each year bought currently provides an extra £275 a year, so if you survive for three years past state pension age, you get £825 back, a full return on your money before tax. “The longer you live, the more significant the boost,” Orchard said.
This is a complex area and not everyone with gaps will actually need to top up, Orchard said. “You may also be able to apply for free NI credits to plug the gaps, say, if you were on statutory sick pay, caring for a family member, or on maternity, paternity or adoption pay.”
Those who buy extra state pension but die before retirement age will get nothing, there is no benefit to buying more than 35 years of NI.
Visit gov.uk/check-state-pension to find out where you currently stand.