To receive a full state pension, you’ll need 35 years of NI contributions over your working life.Did you know you only have until July 2023 to fill any National Insurance gaps from 2006 until 2016?
For many, that’s not a problem as we will typically work 40+ years in our lifetime.
For others, parents, carers, those who take a break or don’t work all their life, you may have gaps in your contributions that mean you won’t get a full state pension.
You can do something about that though. It costs money but it’s well worth the investment.
Pensions are an incredibly complicated subject but this part of it is simple enough that I can explain it.
When can you get your full state pension?
The state pension is guaranteed income for when you reach state pension age.
Note, that doesn’t mean when you retire, but when you reach state pension age. That is currently 66 for men and women.
There are plans to increase that to 67 and then 68 over the next decade or so.
By the time I retire, the state pension age will likely be 70 or higher.
Not a nice thought!
The state pension age differs from retirement age because we can technically retire at any age. If you’re fortunately enough to have enough to live on, you can retire whenever you like.
But you’ll only qualify for the state pension when you reach state pension age.
You can find out your own state pension age on the government website. Just enter your date of birth and it will tell you the current age you’ll qualify.
It may seem like a long time away but everyone should plan for their pension now.
That’s especially true if you have not worked throughout your life.
Ensuring you get the full state pension
To qualify for the state pension at all, you’ll need a minimum of 10 years’ National Insurance contributions.
To qualify for the full state pension, you’ll need 35 years of contributions.
You can find out how many years of contributions you have on this government website.
Select the check your national insurance record link on the page and follow the wizard to calculate how many years you have and how many you need.
The system will also give you a projection of how much state pension you’re currently entitled to.
If you have 35 years, or close to it so you’ll have enough by retirement, there’s nothing else you need to do.
If you have missing years, you have the option to make voluntary national insurance contributions to top up your state pension.
Each full year currently costs £824 and you can buy 1 year at a time.
You can currently backdate that until 2006 but there’s a deadline of July 2023 for that. Once the deadline passes, you’ll only be able to backdate it until 2016.
If you’re considerably behind, it’s well worth making a voluntary contribution to top it up.
An £824 contribution could turn into over £20,000 if you live the estimated 20 years after retirement.
There is no current way of investing that comes anywhere close to that kind of return!
I appreciate that not everyone is going to have £824 lying around to invest in their future. But I would strongly recommend investing in contributions if you’re short as it does make financial sense.
Full state pension and contracting out
If your pension forecast says you need many more than 35 years or that you won’t receive the full pension, you may have contracted out.
That is a complicated topic and not something I’m qualified to discuss.
However, the former pensions minister wrote a very informative article explaining pensions very well. Check it out.
