Britons have been urged to do a state pension check as it could be the ‘best decision’ for their retirement.
A person may be able to increase their state pension entitlement by voluntarily paying National Insurance (NI) contributions, to cover gaps in their record.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said topping up could be “one of the best retirement decisions you make”.
She explained: “Checking your tax account for any gaps in your National Insurance record quickly identifies whether you have enough qualifying years to receive a full state pension – a valuable source of income considering the full new state pension rose by 8.5 percent earlier this month and is now worth £11,502 a year.
“The state pension forecast calculator stored in your Personal Tax Account states what year you will receive your state pension, the amount you will receive weekly, monthly and per year (without factoring in inflation) according to your current and projected contribution level, and a forecast of what you will receive if you continue to pay in.”
A person can typically only pay NI contributions as far back as six years ago but this is currently extended as far back as April 2006. This extended scheme is in place until the end of the 2024-2025 tax year.
Ms Haine spoke about the sort of people who may have gaps in their NI record. She said: “People that might need to top up include those that took a career break as well as low earners or expatriates living and working abroad.
“Plugging any gaps will ensure you receive your full state pension entitlement, a vital income source in the later stages of life when you may not be fit enough to continue working or have inadequate private pension savings.
“Whether someone needs to top up depends on how many more years they plan to work, as they may or may not have enough time to make up the shortfall, or whether they are eligible for NI tax credits, which fill the gaps, such as those who are sick, were unemployed or took time out to raise a family or care for elderly relations.”
State pension payments increased 8.5 percent from April, with the full new state pension now paying £221.20 a week. The full basic state pension is now £169.50 a week.
With this sizeable increase and the record 10.1 percent boost to payments last year, some experts have questioned if the triple lock will be viable for much longer.
Mark Pemberthy, benefits consulting leader at insurance group Gallagher, said: “Whilst the triple lock may be affordable over the next five years, it looks unsustainable in the longer term.
“The future cost of the state pension as a percentage of GDP is projected to increase by more than 50 percent over the next 50 years and this looks unaffordable.
“It is important that we look beyond the short term political cycle and establish a stable long-term plan for a sustainable state pension, if we are all going to be able to plan for our futures with confidence whilst ensuring fairness for future generations.”
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
