SAVERS have four extra months to buy state pension top-ups that could boost their retirement income by thousands a year.
Leah Milner explains how to make sure you don’t miss out.
WHAT’S HAPPENING? A scheme allowing savers to plug gaps in their National Insurance record going back ten years earlier than normal was due to end on April 5.
It has now been extended to July 31.
You need 35 years of NI contributions to get the full amount under the new state pension system, but if you’ve had periods out of work, on a low income or self-employment, you might have gaps.
However, now you can “buy back” missing years and weeks.
Normally it’s only possible to go back six years, but up until the end of July you can go back much further.
It’s the last chance to fill any gaps between the 2006/7 and 2016/17 tax years.
THE COST OF TOP-UPS: Buying back years can cost quite a lot up front, but the extra income it could give you in retirement really mounts up.
The benefit depends on how long you live and there are some situations where you won’t gain from topping up.
If you’re someone who can benefit from top-ups, you’ll make the cost back within three or four years of claiming your pension (depending on whether or not you pay tax when you retire).
For those with a full 35-year NI record, the maximum state pension will be just under £204 per week from April – that’s £10,600 a year.
But anyone with gaps gets less.
Plugging a missing year costs £824 and would give you around £300 a year extra.
So if you live for another ten years, once you start claiming your pension, you’d be £2,200 better off for buying back the missing year.
Buying back five missing years would cost £4,120 upfront but give you £11,000 if you claim the state pension for ten years.
The cost of top-ups has been frozen until July 31. Each missing year will cost £907 from August 1.
HOW DO I DO IT? Check your state pension forecast at gov.uk/check-state-pension.
If you’re not forecast to get the full amount click the link in your forecast to look for any gaps in your NI record.
If you are already at pension age you should also check your NI record at gov.uk/check-national-insurance-record.
If you identify any gaps, contact the Government’s Future Pension Centre on 0800 731 0175 (if not yet at pension age) or the Pension Service on 0800 731 0469 (if already retired).
They can help you work out if it’s worth topping up or if you’re missing out on any free credits.
Buying back partial years is cheaper than full years but can boost your income by the same amount.
