Pay extra national insurance contributions to boost your state pension
Wednesday 22 February, 2023
Paying voluntary National Insurance contributions enables you to qualify to get the full State Pension. If you have gaps in your record, you might be able to make voluntary contributions to fill them. Read our article to find out how.
Firstly, we recommend that you:
Check Your State Pension Forecast
This might apply if you are aged between 45 and 70 years old
If you are between 45 and 70 years of age you may be entitled to buy extra national insurance (NI) years which could boost the value of your state pension. The returns could be meaningful. As an example, if you spent £750 you might be entitled to over £5,000 more in state pension.
How can I purchase more National Insurance contributions?
The reason it’s possible to purchase more National Insurance is due to the ‘transitional arrangements’ that occurred when the new state pension system was introduced in 2016. However, these will end on 5th April 2023, so this is the last tax year it’s available. You have until 5 April 2023 to make up for gaps for the tax year 2016 to 2017. You can sometimes pay for gaps from more than 6 years ago, depending on your age.
Classes of National Insurance contributions (NICs):
- Class 1 contributions are paid by employers and their employees.
- Class 2 contributions are fixed weekly amounts paid by self-employed people.
- Class 3 contributions are voluntary NICs paid by people wanting to fill gaps in their contributions record.
- Class 4 – self-employed earning profits of £11,909 or more a year.
What to do if you want to pay more national insurance contributions by 5th April
Tracy Dove, Financial Adviser and Mortgage Broker in Laindon, Basildon and Exeter said:
‘Time is running out if you want to check your state pension and make voluntary national insurance contributions before the rules change. The first thing we recommend is to check your state pension forecast which gives you an estimate of your pension, by going to Check Your State Pension Forecast.
The projected state pension is based on whether you have contributed national insurance contributions historically and continue to make them. To understand more about how you can contribute missing national insurance contributions call our financial advisers who can assist you with your state pension planning. We can review the costs of voluntary contributions with you to determine how much you can contribute and whether it represents value for money given your individual circumstances.
What to consider before making voluntary national insurance contributions
Tracy Dove, Financial Adviser and Mortgage Broker in Basildon and Exeter continued:
‘Our financial advisors will review your state pension forecast. We can confirm if making voluntary contributions will increase your state pension. Remember that you need 35 qualifying years to receive the full state pension, (30 years for anyone who reached state pension age before 6/4/16) so if you already have this you might not need to contribute more. Also, it is worth noting that you will pay more tax with an improved state pension and if you die before reaching the state pension age you won’t receive anything, so if you are in ill health now, it might not be a good idea.
If you claim pension credit, any increase in your state pension normally reduces your pension credit award. There are also other ways to increase your state pension that might be worth exploring, such as using the contributions from your spouse or civil partner or former spouse or civil partner.
If you want more information about the pension advice, we offer at Thomas Oliver please contact us on 01707 872000. We offer an initial financial planning consultation to discuss our charges and the financial advice we provide’.
In Summary…
Review your state pension forecast to check if you are eligible to make voluntary national insurance contributions before 5th April 2023.
