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Increasing your state pension

The State pension is a valuable source of later life income for many in the UK.

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What is the State Pension and why is it important?

The UK State Pension is a regular guaranteed monthly payment provided by the UK government to those individuals who have reached the qualifying age and have made sufficient National Insurance contributions during their working life. It is intended to provide a basic income for retirees in the United Kingdom.  The current State Pension Age is 66 for most*, although it is likely to change in the future.

The amount of the UK State Pension is based on an individual’s National Insurance contributions or credits accumulated throughout their working life. To qualify for the full New State Pension, you generally need to have at least 35 qualifying years of National Insurance contributions and a minimum of 10 years to receive any.  If you have fewer than 35 qualifying years, but more than 10, you may receive a reduced amount.

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Why might you need to improve your state pension entitlement?

There are several reasons why you might want to improve your state pension entitlement.:

  1. Insufficient contributions: The UK state pension is based on the National Insurance contributions you have made throughout your working life (each year you meet the threshold counts as a years worth of NI towards your state pension). If you have gaps in your contribution years or have not contributed enough, you may receive a reduced pension amount. In such cases, individuals may want to improve their entitlement by making additional contributions to fill the gaps and increase their overall pension.

  2. Pension credits: Some individuals may be eligible for pension credits, which are means-tested benefits provided to supplement the state pension. If you find yourself in a situation where you qualify for pension credits, it can enhance your overall income during retirement and also gives access to certain benefits.

  3. Marriage and Civil Partnership: If you’re married or in a civil partnership, you may be entitled to additional state pension based on your partner’s National Insurance contributions. This is known as a “protected payment” or “additional state pension.” If you believe you are eligible for this benefit but haven’t received it, you can contact the government’s Pension Service to explore your options.

  4. Voluntary contributions: Making voluntary contributions, such as Class 3 National Insurance contributions, can help fill gaps in your National Insurance record and increase your state pension entitlement. This option is particularly useful for self employed individuals* who have not worked  enough or have gaps in their employment history.

  5. If you have worked overseas for part of your working life then you may have not been paying enough NI contributions in those year for those years to qualify.

It’s worth noting that pension entitlements and rules can change over time, so it’s essential to stay up-to-date with the latest information from the UK government’s official channels, such as the Department for Work and Pensions (DWP) or the Pension Service.  Alternatively you can speak to a trusted accountant, financial adviser or other finance professional.


Paying voluntary NI

It’s important to keep track of your National Insurance (NI) contributions in order to receive the state pension you’re entitled to. You can usually pay voluntary NI contributions for up to the past six years – or possibly longer, depending on your age – to make up for any gaps.  For example, you have until 5 April 2024 to make up for gaps for the tax year 2017 to 2018*.

The state pension is currently covered by the “triple-lock,” meaning it will increase each year by the greater of price inflation, earnings growth or 2.5%, a key part of why the state pension can be very valuable. If you receive the additional amount for a minimum of three years, you could have already covered the cost. However, if backdating isn’t sufficient to bring you up to a full NI record, you can additional voluntary contributions, which are currently £907.40 per year (Class 3 for the 2023/34 tax year)*, in future years to top it up.

Once you have the relevant information, it’s fairly straightforward to calculate how much extra pension income you will receive each year and what the cost is to achieve that, to determine whether it’s a good investment or not.


How to check your entitlement

You can check your entitlement and request a full NI history by sending a completed form or letter or accessing your details online.  The NI history will show you exactly which years you can pay, the cost, and the deadline for payment.

To obtain your current State Pension statement you can fill in HMRC form “BR19*”.  Simply fill in the form, sign and send it to the address on the form. 

Alternatively , you can write to “NIC and EO, HIM Revenue and Customs, BX9 1AN” requesting a full NI history.

If you have a log in for the Government gateway (i.e. if you do on line tax returns) then you can obtain this information on line in your online tax account.

Your State Pension statement will show you your current state pension estimate based on your current NI record and also the estimate assuming you contribute until state pension age.  It will help identify if you have any gaps in your payment history, (e.g. if you are non-earning spouse).


Impact of Divorce on State Pension

Previously, if a couple went through a divorce or dissolution of a civil partnership, they would still be able to get a full state pension if their former spouse had a full NI history, as they could substitute theirs for their partners.  However, as of 6th April 2016, an individual’s state pension will solely be based on their own NI history and it will no longer be possible to substitute a former spouse’s NI history.  This will be a major in particular for non-working spouses, who in the main are female.

Many divorce settlements from before April 2016 will have assumed the non-earning spouse would substitute their own NI record for their former spouse and so get a full state pension. However, as mentioned above, if the spouse has a state pension age after April 2016, this will no longer be the case.

For each year less than 35 qualifying years that you haven’t paid NI, you lose 1/35 of the weekly pension, which is currently £203.85 (2023/24 tax year)*. 

Final Thoughts

Despite what many may think, the UK state pension can be very valuable; offering a guaranteed income from state pension age onwards that currently has a generous policy for annual increases.  If you have missed any NI years or there are other reasons why you may not get your full entitlement then it is worth checking your NI record to see what you have missed and if there is anything you can do to rectify the situation, 

It’s important to note that the State Pension may not be sufficient on its own for a comfortable retirement, especially considering rising living costs and increasing life expectancy. Therefore, it may be advisable for individuals to consider additional personal or workplace pensions and savings to supplement their State Pension and enhance their overall financial security in retirement.