There’s still time to top-up your State Pension
If you are in a position where you want to top up your State Pension then there’s still time to do so before a price rise is being introduced in April. Depending on your circumstances, paying voluntary National Insurance contributions to fill gaps in your National Insurance contribution record can be a financially attractive way to boost your income in retirement. However, filling any such gaps and receiving a higher State Pension in return, is set to become more expensive from 6th April 2019.
If you reach your State Pension age after 5th April 2016 and therefore qualify for the new State Pension system, then you can currently fill any gaps in your National Insurance contribution record at very favourable rates. These concessionary rates are however due to expire on 5th April 2019, making the cost of filling the same contribution gaps hundreds of pounds more expensive.
How do I top up my State Pension?
The first step is to check your National Insurance contribution record for any gaps. The simplest way to do this is to visit www.gov.uk/check-national-insurance-record and use your Government Gateway check your National Insurance record online.
This online check will tell you what you’ve paid, up to the start of the current tax year, any National Insurance credits you’ve received, if gaps in contributions or credits mean some years don’t count towards your State Pension (they aren’t ‘qualifying years’), and if you can pay voluntary contributions to fill any gaps and how much this will cost.
Once you have this information, you will need to act before the end of this tax year to fill any gaps in your ‘qualifying years’ to benefit from the current concessionary rates and boost your State Pension income. As things stand, if you’re covered by the new State Pension system and you have a gap in your contribution record for any year from 2006/07 to 2015/16, you have until 5th April 2023 to fill those gaps.
Despite this generous amount of time to fill the gaps, the current concessionary rates for making voluntary National Insurance contributions will expire on 5th April 2019.
What happens if I don’t top up now?
The normal rate for buying back each week of National Insurance contributions will revert to £15 following the above deadline. Different rates are being charged for those acting before 6th April 2019. In fact, the weekly rate varies from £12.05 for the 2010/11 tax year to £14.10 for 2015/16.
Depending on which gap of your National Insurance record you need to fill, the difference between the ordinary and concessionary voluntary rates of National Insurance contributions could represent hundreds of pounds.
For example, if you want to fill a National Insurance contribution gap for 2010/11, you will save more than £150 by doing so before 6th April 2019. The potential saving will be more than £500 for anyone wanting to fill six years of contribution gap between 2010/11 and 2015/16.
How do I know I will benefit?
Before deciding to top up any gaps with voluntary National Insurance contributions, it’s important to check that doing so will actually boost your State Pension income.
The challenge here is that a rather complex set of transitional rules mean it is not always the case that filling these gaps with voluntary contributions will result in a higher State Pension. In order to check, you can contact the DWP Future Pension Centre on 0800 731 0175 or by using the online form at https://www2.dwp.gov.uk/tps-directgov/en/contact-tps/fpc.asp. Your State Pension is a valuable part of your overall retirement income, so it’s important to maximise this inflation proofed income where possible and affordable. With the deadline to benefit from concessionary rates of voluntary National Insurance contributions looming, it’s important to take a few simple steps to understand whether you can potentially save hundreds of pounds on the cost of topping up your State Pension income.
Duncan Arthur APFS Cert (DM)
Chartered Financial Planner
Blackadders Wealth Management LLP