People considering voluntarily paying National Insurance contributions for their state pension have been urged to carry out an important check.
A person could increase their state pension payments by thousands of pounds over the course of their retirement, by topping up their National Insurance (NI) contributions.
If you believe you are missing contributions, you should first check which years you can top up. This can be done by contacting the Future Pension Centre, if you haven’t reached state pension age, or with the Pension Service, for those of state pension age.
It’s important to check with the relevant organisation as voluntary contributions may not actually increase a person’s state pension.
If you start topping up your contributions without checking this, you may overpay and not be reimbursed by HMRC.
Under the current rules, a full year of NI contributions costs £824.20 to fill, and provides an extra £302.64 a year.
This would provide an extra £6,052 in state pension payments over a 20-year retirement at the current payment rates.
State pension payments are increasing 8.5 percent in April, with the full new state pension going up by £900 a year, increasing from £203.85 a week to £221.20 a week.
A person typically needs to pay in 35 years of NI contributions to get the full new state pension.
Peter Glancy, head of Policy, Pensions & Investment at Scottish Widows, told Express.co.uk people may want to consider increasing their working hours as it can make a big difference for their state pension.
He said: “If you are working part time – check that you are doing enough hours to qualify for a year’s credit. An extra couple of hours a week might not make a big difference to your lifestyle today, but it could make a big difference in retirement.”
The later life expert also encouraged people planning for their retirement who are out of work, to see if they can get National Insurance credits towards their state pension.
He explained: “Whilst in many circumstances this will happen automatically if you are claiming a Carer’s Allowance, there are other circumstances when you will have to complete a form to secure the credit.”
He said another concern is the trend of people going into retirement with large housing costs, still paying off a mortgage.
But there are ways people can plan ahead to avoid these costs. Mr Glancy said: “Owning your home outright when you retire will substantially reduce your costs during retirement.
“That can mean prioritising saving for a deposit when you are young and want to spend the money on other things. It also means not being so ambitious with the size of house you choose to live in, that you have to carry mortgage costs on through your retirement.”
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