State Pension: Expert outlines criteria to qualify
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Securing as much state pension as possible is a key goal for many, and voluntary National Insurance (NI) contributions may hold the key. Express.co.uk spoke exclusively to Andrew Tully, technical director at Canada Life, who offered more insight on the matter.
Mr Tully first states it is key for Britons to ask about their state pension forecast.
The state pension forecast provides insight into how much a person could get, when, and how to increase it if possible.
The document will hold the key to finding out whether a person is on track to secure the level of contributions needed for a full state pension.
For a full new state pension, 35 qualifying years are usually required, while for the full basic state pension, this is 30 qualifying years.
Some may get less than the full new state pension if they were contracted out before April 6, 2016.
Once a person has established there are gaps in their record, it will be up to them to decide what they do next.
As many are keen to receive the full state pension sum, paying voluntary NI contributions could be the best step.
Mr Tully explained: “You can pay voluntary NI contributions to make up for gaps in your record, normally for the previous six years.
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“For example, you can pay voluntary missing NI contributions for the tax year 2016 to 2017 by April 5, 2023.
“Voluntary NICs will currently cost you around £800 for one years’ credit of Class 3 contributions, so can be a very good deal.”
For the current tax year, Class 3 contributions cost £15.85 per week, which works out as £824.20 for the year.
Rebecca O’Connor, head of pensions and savings at Interactive Investor, previously told Express.co.uk: “Each additional qualifying year that you generate will add 1/35th of state pension, which on the new state pension is around £5.29 a week from April 6, or £275.08 a year.
“Over the course of the typical 20-year retirement, you could get £5,501.60 in total extra state pension.”
Of course, Britons will need to consider issues such as life expectancy to see whether they will recoup their money back from the purchase of voluntary NI contributions.
Mr Tully states people should always check their National Insurance record before deciding to make voluntary contributions.
He continued: “If you are on track to secure 35 years NI record there is no benefit in paying in additional contributions – your state pension is fixed at the maximum you will receive.
“If you overpay voluntary contributions, and later find out you will secure the all important 35 years NI record, you can’t ask for your money back.
“So think very carefully before paying.”
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People should also be aware voluntary contributions do not always increase the state pension – and they might not be the right choice for everyone.
As a result, individuals may wish to contact the Future Pension Centre to find out if they will benefit, and may also want to seek financial advice on the matter.
Some Britons will be eligible for National Insurance credits to fill the gaps in their record, for example, if they were:
- Unemployed but had low earnings
- Unemployed but not claiming benefits
- Self-employed but did not pay contributions due to small profits
- Living or working outside of the UK.
Mr Tully concluded: “Check if you can apply for NI credits if there are gaps in your record.
“For example if you received a Carer’s Allowance, child benefit, a record of signing on and claiming Jobseeker’s Allowance, before looking to pay voluntary NI.”
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