For most retirees, the State Pension forms the foundation block of retirement income. Anyone now reaching State Pension age with their full entitlement receives a guaranteed income of £185.15 per week (£9,660.86 per year). The “triple lock” currently means this income increases each year by the higher of:
• National average earnings
• The Consumer Prices Index (CPI)
• 2.5%
Although the triple lock is not immune from change, in the current high inflationary and uncertain market environment, this type of guaranteed, index-linked income is an extremely valuable benefit.
Eligibility and entitlement
To qualify for a full State Pension, you will need a complete NI record of 35 years. Broadly speaking, this entitlement builds up through:
• Working and paying National Insurance
• Receiving NI credits
• Paying voluntary NI contributions
You can check your state pension forecast and the additional NI credits required to receive the full entitlement at https://www.gov.uk/check-state-pension.
Making voluntary contributions
If you do have a shortfall in your state pension entitlement, you may be able to pay voluntary contributions to fill any gaps in your NI record. Usually, it’s only possible to pay for gaps for the previous six years. However, men born after 5 April 1951 and women born after 5 April 1953 have until 5 April 2023 to pay for any eligible gaps between the tax years April 2006 and April 2016. This effectively creates a window of 16 years. After 5 April 2023, this will revert to the usual six-year period.
The cost to fill in gaps in an NI record are up to £3.15 per week for class 2 contributions (£163.80 per year) or up to £15.85 per week for class 3 contributions (£824.20 per year). As each additional qualifying year equates to an extra £5.29 per week (£275.08 per year) of State Pension benefit, it’s easy to see the value of making these contributions. Voluntary payments can be made as a one-off payment or by quarterly or monthly instalments.
This article is for information only and should not be construed as advice or a recommendation. You should always seek independent financial advice prior to taking any action.
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