National Insurance record – maximise your State Pension

Retirement – A time of relaxation, spending time with loved ones and endless holidays (or so they say). It is also when most start to dive into savings and receive their pension income, with the State Pension being one of the most well-known sources of income for over 65’s. But how do you ensure you have made enough National Insurance contributions to receive your full State Pension?

It is a common misconception that HMRC treats your National Insurance contributions in the same way as income tax, with regular annual checks. In reality, HMRC do not check an individual’s National Insurance record as a matter of course. The primary responsibility for doing so remains with you as the taxpayer. To receive the full State Pension you must have 35 ‘qualifying years’ and at least 10 years to receive any State Pension.

This can leave some taxpayers confused as they have ‘gaps’ in their National Insurance record and can mean receiving a smaller State Pension than expected.

How do I check to see if I have any gaps?

HMRC provides several ways for taxpayers to check what you have paid so far, identify any gaps and the option of making voluntary national insurance contributions to fill these gaps. These include the below:

• Personal Tax Account – this is a useful service for checking other areas of your tax affairs too. You can read more about the Personal Tax Account here.
• National Insurance Account – an online request form for printed national insurance statement. Obtain yours here.
• Requesting a State Pension statement from the Future Pension Centre by calling 0800 731 0175 – Advice can also be given as to whether you will benefit from making voluntary contributions.

Why would I have gaps?

• If you are employed, this could be due to earnings being below £118 p/w such as during periods of statutory sick pay.
• Due to periods of un-employment
• If self-employed and yearly profits on your tax return are less than £6,350 (Small Profits Threshold)
• Periods spent living abroad
• Due to periods of non-work to raise children or act as a primary care giver

Filling in the gaps in your National Insurance Record

If you feel that the above applies to you then we recommend checking your record. But don’t fret, there are many ways to fill the gaps of your National Insurance record in order to maximise your State Pension.

Voluntary Contributions

• Class 3 NIC voluntary contributions allows you to fill in any gaps for usually the previous 6 years. The cost for the 2019/20 tax year is £15.00 a week and can be paid here.
• Self-Employed only - Class 2 NIC contributions can often be paid each year through your self-assessment tax return (with some exceptions) or by paying voluntary contributions or straight to National Insurance. The cost for the 2019/20 tax year is £3.00 a week, and can be paid here.

National Insurance Credits from State Benefits

Some State Benefits will entitle you to credits for your State Pension. Some will be an automatic entitlement, whilst others will require you to apply.

Automatic Credits

• Carer’s Allowance
• Jobseeker’s Allowance (not in education or working more than 16 hours a week)
• Universal Credit
• Working Tax Credit – only one partner will receive credits and should check their NIC record to ensure this is the case

Stay-at-home parents

Claiming Child Benefit is the best way for non-working parents to receive automatic credits for your State Pension. This would still be effective even if your partner earns over £50,000 and falls under the High-Income Benefit Charge as you can apply for benefit (and receive credits) but opt out of payments. HMRC also allow the transfer of these credits to your spouse or partner.

Apply for Credits:

Those who should apply for credits include:

• Foster Carer which restricts your income
• Jury Service for extended periods
• Statutory Sick, Statutory Maternity/Paternity or Adoption Pay – if you did not earn enough to have a qualifying year
• Married/Partnership to member of Armed Forces and moved to an overseas posting

The Earlier the Better!

Although for some receiving your State Pension might seem in the distant future, it is never too early to start paying contributions towards your State Pension. This will not only give you peace of mind in your later years, but taxpayers should be wary that voluntary contributions can usually only be made for up to 6 years previous. This means that realising you need to make further contributions at state pension age can be too late!

If you would like more information regarding this then do get in touch with one of the team by using the contact form here.