Whilst explaining the process, Martin said, “So let me take you through this because it’s not that simple. If you are aged 45 to 70, you need to check ASAP if you can boost your state pension now.
“This is about the new state pension that was introduced on 6 April 2016. And it is only for people who hit state pension age after that. So roughly people under the age of 70. The key point is that at the time, transitional arrangements were put in place that end this tax year, so the 5 April 2023.”[1]
Mr Lewis advised taking the following steps to see if you might be missing any National Insurance Contributions for your State Pension, and how you can take steps to try and rectify it.
Here is a full transcript below of Martin Lewis’s tips on boosting your state pension.
Step 1 – Check your National Insurance Contributions on www.gov.uk to see if you are missing any
Mr Lewis explained: “Now, this is all about your national insurance years; the state pension that you get is paid out based on the number of qualifying national insurance years you have. You acquire those by working if you are earning over £123 a week, or you can be given national insurance credits if you are raising children, or in some cases, if you have a disability.
“To get the full state pension, you need 35ish years – it depends. It is not a certain figure, but have that as a ballpark, so you can understand it. And some people are missing years, so they will not get the full state pension. For example, years abroad, or you had a low income, so you were not earning that much.
“So, this is the first thing I want you to do – and you could do it even if you’re under 45, because it’s quite interesting – I want you to check your national insurance. So go to Gov.uk. This is if you are not at state pension age yet and check your state pension forecast. That will be interesting. And then click the link that says, ‘View your national insurance record’.
“If you’re over state pension age already, you just go straight to check your national insurance record on Gov.uk and it will tell you whether you are missing any years.”[1]
Boost your state pension Step 2 – If there is a shortfall, you can buy more years. But it is time sensitive
Mr Lewis further explained: “Now, if you do have a shortfall, you can buy more years. And this is the bit that is time sensitive – until April 2023 you can buy national insurance years back to 2006. After that, you can only go back six years. So, if you have national insurance gaps for the years from 2006 to 2017, you need to decide soon whether you are going to buy them, or you will lose the opportunity to do so.
“Now if you’re near state pension age, then it is easier to see if it’s worth it for you. The younger you are, the more time you will have to naturally plug any gaps yourself, which is why I said it was only for people aged over 45. It may be only 50 or 55. But it is worth having a look if you are that age.
“If you’re younger, then it will be work that should be able to pick it up. So, it would be a risk buying because you might already get to your state pension years without needing anything extra.
“It’s also worth noting that if you’re missing years, you may be due national insurance credits for free, which you can check on the Gov.uk national insurance credits page. For example, carers credit or childcare, or have you had an illness? So always check that first before buying any.”[1]
Boost your state pension Step 3 – It will take roughly three years to break even
“Now let me move to my calculator. Bring it out here. There we go. Here is the maths; a voluntary national insurance year costs around £800ish (I must do those caveats), and it adds £275 a year to your state pension. So, the breakeven point is three years. So, if you live three years beyond state pension age, or if you are already at state pension age and three years beyond the point that you get this, you are quids in.
“So, let’s look at typical life expectancy first. A man who gets to age 66 will typically live 19 more years. So, each £800 in that case would get him £5,300 back. And that is before the fact that it is normally linked with inflation (obviously, that is another discussion now for another day). For a woman, because women live longer, for 21 more years at the same age, each £800 would be worth £5,800 extra.
“And there are calculators available online so you can see. So, look, we are talking real money. And it is worth doing – though of course, you would have to have the cash to do it.”[1]
Always get a personalised calculation first – this is complicated
Mr Lewis concluded with: “But then let’s make this a little bit more difficult. First of all, please do not rely solely on what you are hearing me say – this is complicated, and I have simplified it to give you a call to arms to who should be checking it out. Always contact the Government’s Future Pension Centre for a bespoke calculation to tell you what would happen in YOUR case before you pay any money out.
“And I am afraid that I also have what I am calling a ‘baboon warning’ – lots of butts. Even once you have gone to them, they will not talk to you about the fact that if you are on a lower income and you do not have a big pension, you might be entitled to pension credit for a top-up – therefore paying money to top up at your normal state pension will not give you as much back – or the fact that if you are a high earner that this might put you into a higher tax bracket, which would take some of the gain away.
“So, there are lots of complexities here. But the big picture for most people, if you are short of national insurance years and you are getting near state pension age – and they are not available for free – then buying them is worth decent cash.”[1]
