I am a 51 years old, and have worked for the majority of my life. After my children were born in 2010 and 2012, I decided to take a break from work for a few years, returning to part-time work in 2016.

I have heard people have a limited time to pay the government to make up for missing national insurance contributions so they can boost their state pension and think this could apply to me. 

I would like to retire at age 60. Can you help me on what I should do?

Andrea

Rachel Vahey, AJ Bell Head of Public Policy, says:

The state pension forms a large part of many people’s retirement plans, helping to bolster any income from personal or company pensions.

Those reaching state pension age after 2016 should be entitled to receive the single state pension, which is currently £11,542 a year or £221.20 a week.

For now, the state pension age is 66, but this will rise to 67 from April 2028, and then it’s scheduled to rise to age 68 in the mid-2040s.

To receive the full state pension you need to have paid in, or been credited with, national insurance contributions for 35 full years.

It’s important, therefore, that those who have had breaks in their working history check their current position and how many years they have built up so far.

If you are missing years, you can take action to plug the gap by paying in voluntary national insurance contributions to make up any missing years in the past six years.

The deadline is 5 April each year, so, for example, you have until 5 April 2030 to make up for gaps for the tax year 2023-24.

However, there is currently an opportunity to go back further than that and fill in any missing years back to 2006-07, but you only have until 5 April 2025 to take advantage of this extended window.

This ticking clock deadline has created a sense of urgency leading to the heightened media coverage.

Paying voluntary national insurance contributions is a good way of boosting your later life income, but the first thing you need to do is check your national insurance record, to see if this is an opportunity that applies to you, which is easy to do.

You can access your full information through the government gateway, where you should be able to see if you have any missing years of national insurance.

Even if you have not been working, you may have recorded a ‘full year’ on your national insurance record through credits – for example, if you have been claiming benefits for caring for others, such as children under 12 years of age.

Parents who took a career break may find they don’t actually have any gaps for those years after all.

However, since the introduction of the high-income child benefit charge (which imposes a tax on those in high-earning households claiming child benefit), many people have chosen to simply opt out of getting child benefit payments.

If that’s the case, they may not be getting the corresponding national insurance credits and this is definitely worth checking out.

It’s now possible for a high earner to register for child benefit but opt out of receiving the payments, so that they or their partner still receive the national insurance credits.

If you can plug any gaps through credits, then this could be your best solution as it won’t cost you anything.

If you still have missing years, you need to decide whether it’s worth taking any action.

Unless you are very close to or over state pension age, then you may have an opportunity to reach your target of 35 full years of national insurance by simply carrying on working.

Sadly, if you exceed the 35-year target, which many people do, you don’t get a higher state pension but you still need to keep paying NI up to state pension age.

Therefore, if you were planning on working anyway it may not be worth paying voluntary NI.

Another thing to check is whether pension credit applies to you. This tops up low-income pensioners’ incomes, and those who claim it are also entitled to a range of other benefits including the winter fuel payment.

However, if you can get a higher state pension it may mean that you lose out on pension credit, so those on low incomes should first work out the implications.

The details of claiming pension credit can be extremely confusing, so those worried about this could consider getting guidance on this from, say, MoneyHelper or Citizen’s Advice.

It’s right that we should be throwing a spotlight on the opportunity to fill in national insurance gaps, and that action needs to be taken quickly before next April.

Whether this applies to you depends completely on your personal circumstances though, so before you part with your hard-earned money by paying voluntary contributions check out your personal national insurance record through the government gateway.

Many people may find they don’t have the gaps they thought they had, or those gaps they can be filled by claiming credits, or by working for a few more years.

For those remaining situations where it does apply, then paying voluntary national insurance can be a positive step.

DO YOU HAVE A QUESTION ON RETIREMENT ISSUES?

Send an email to askrachel@ajbell.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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