Many are unsure as to what they will receive and when they will receive their state pension. We have seen many changes over the years which include when we receive our state pension and how much we will receive which is based on our National Insurance contributions. This leaves many confused. That said, the state pension is still a great underpin for income in retirement. We always recommend that clients should make their own provision to ensure they will have a comfortable retirement.
If you want to know if you are on track for a comfortable retirement then contact us for a free initial chat.
The Government provide an excellent way of checking your state pension online. Go to this link and you can immediately see what you will receive and when. You can also see your full NI record. https://www.gov.uk/check-state-pension
Royal London has produced a step by step guide to topping up your pension, whether you fall under the old or new system.
Article Daily Telegraph 09/05/2015
9 MAY 2017 • 10:56AM
If someone offered you a 30pc return on your money you'd probably assume it was a scam. But that's exactly what the Government offers through its state pension top-up scheme.
If you make "Class 3 National Insurance contributions" you can fill in missing years in your NI record, which determines how much state pension you'll receive.
Now that the new tax year has begun, you can check if you paid enough National Insurance in the last tax year, 2016-17. How much extra pension you can buy depends on whether you fall under the old or new state pension system.
For those who come under the new system, which applies to anyone whose state pension age falls after April 6 2016, the cost to "buy" a missing year in your National Insurance record is £741 (although you can buy as little as an extra week).
In turn that buys you £237 a year in the new state pension – the equivalent of a 32pc annual return on your investment. Over a 25-year retirement you would receive an extra £5,925, not taking into account annual increases.
If you reached state pension age before April 6 2016 you fall under the old system of "basic" and "additional" pensions. In this case a £741 payment produces an extra £212 a year, or £5,300 over 25 years.
To qualify for the new "single tier" state pension you need a full record of 35 years of National Insurance contributions (NICs). If you have a 35-year record you'll receive the full amount of £159.55 a week (although you are likely to get less if you were "contracted out" of the state pension during your working life).
Time spent off work to raise children below the age of 12 or to care for a relative also counts as qualifying years, although these periods may not have been recorded if the correct form was not completed at the time.
Each year below the full requirement of 35 shaves 1/35th off the full amount. This is why it's important to check your record and fill in any gaps.
Steve Webb, a director at Royal London, the pension firm, said: "The price of topping up your state pension continues to be heavily subsidised. As a result, there is a risk that a cash-strapped government will pull the plug on this scheme at short notice.
"For those who can benefit from this scheme, it is well worth considering filling gaps in your pension record for each year as soon as it becomes possible to do so."
Normally it is possible to fill in missing years as far back as six previous tax years. But those who come under the new system will be able to top up years from 2006-7 until 2023. After that, the six-year rule will apply.
However, it is important to note that workers below the state pension age may reach a full 35-year record in future years, in which case paying a lump sum now will not result in an increase in your pension.
Visit the Government's "check your state pension" website to help decide whether it's worth topping up now. The site will produce your "personal maximum" and if this is the full rate of £159.55 or more it may not be worth topping up.
You can top up using voluntary class 3 NICs paid by cheque, online or over the phone.