State pension payments may be boosted via National Insurance – ‘very likely to make sense’
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State pension payments are vital for millions of retired people, however, some might not receive the full amount. The full new state pension currently stands at £179.60 per week, and is based on the National Insurance contributions made throughout a person’s life. People will usually need at least 10 qualifying years on their NI record to get any state pension, and at least 35 years to get the full sum.
However, there will be individuals who may have gaps in their NI record and could be facing a lesser state pension sum.
One of the ways the matter could potentially be rectified is by someone paying voluntary National Insurance contributions.
But while many people may be willing to make these contributions, should they?
This was a matter explored by Ed Monk, Associate Director at Fidelity International.
He said: “It’s possible to make extra NI payments to make up for missing years.
“For employed people that means paying voluntary ‘Class 3’ NI contributions. Self-employed people usually pay ‘Class 2’ contributions.
“But there are several things to consider before you take that action.
“You can usually only pay to make up for contributions missed in the past six years. If years are missing prior to that it may not be possible to make them up.
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“Bear in mind, however, that if you still have some years to go until you retire you may be able to get to your 35 years of contributions even if you have gaps in your record.
“The closer you are to retirement the more easily you’ll be able to work this out.”
There is also, of course, the notion of the cost of voluntary National Insurance contributions to bear in mind.
This can vary depending on circumstances, but there are costs for the current tax year outlined by the Government.
The standard cost for Class 3 National Insurance contributions is £15.40 per week, working out as £880.80 for the whole year.
Mr Monk added: “For the current state pension, making an extra year of voluntary NI contributions means an extra £5.13 a week of state pension – or £266.83 a year.
“Based on that, someone buying an extra year of NI would make back their voluntary contribution in about three years and four months via a higher state pension.
“In other words, it’s very likely to make financial sense to buy extra years if you can.”
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If a person has questions about voluntary National Insurance, the Government website encourages them to get in touch with HM Revenue and Customs (HMRC).
In addition, a person can use the Government’s Future Pension Centre information.
Here, they will be able to find out whether or not they will actually benefit from making voluntary National Insurance contributions.
The centre also offers guidance on which contributions to make, and how they can be made.
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