A “golden opportunity” for workers to boost their state pensions has been extended, after it was reported that chaos on civil servant phone lines risked thousands missing out. People without a full National Insurance (NI) record are not entitled to the full state pension – currently £185.15 a week – but can pay voluntary contributions to rectify this. Normally workers can only plug gaps in their NI history dating back six years.

An article written by Telegraph Money’s Lauren Almeida explains that; “A change to the state pension in 2016 created a longer, one-off concession, which allows workers to make catch-up payments for the tax years from 2006-07 to 2015-16. This window was meant to close at the end of the tax year on April 5. But the deadline has now been extended by 16 weeks to July 31, after Government helplines were overwhelmed.”

Victoria Atkins, Financial Secretary to the Treasury, said: “We’ve listened to concerned members of the public and have acted. We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their NI record to help bolster their entitlement.”

Sir Steve Webb, a former pensions minister, now of consultancy LCP, said: “This is great news for people thinking of topping up their state pension. For most people, paying voluntary NI contributions to deal with a shortfall in their state pension makes excellent financial sense. But it is also important to make sure that extra contributions are right in your individual case as sometimes additional contributions may not boost your pension. People need time to talk through their options with DWP and then make the correct payment to HMRC and this extension to the deadline should give them time to do this.”

You should be aware that the standard cost to make up a year of missing NI contributions is £824.20, although the self-employed pay just £163.80. All voluntary NIC payments will be accepted at the existing 2022-23 rates until the new July deadline. Thousands of taxpayers with incomplete years in their tax record could be better off in retirement if they made voluntary payments, according to HM Revenue and Customs.

The first step is to check state pension forecasts at: https://www.gov.uk/check-state-pension.

  • If there are gaps in a National Insurance record, then the forecast will look smaller. All workers need around a 35-year track record to qualify for the full state pension, which for many people will exceed £10,000 per year in the spring.
  • There might be gaps if a worker has lived abroad, was unemployed or self-employed or a married woman or widow who stopped paying reduced rates of NI, sometimes called the “small stamp” when they were phased out in 1977.
  • For people who do not plan on retiring in the near future, the pay-off may be limited. If they have many more years ahead in the workforce, then they cannot get the money back if they overpay and will likely make up the contributions through work regardless. If they are in ill health, then they may not be drawing on the state pension for very long and spending cash now may not be advantageous.

Here at The Financial Planning Group we help individuals, families and businesses to place their financial affairs in context with their future goals and aspirations. We provide a simple, structured, disciplined and reviewable planning service. We will change the fundamental relationship people have with their money to give them confidence and clarity in their own future. We want our clients to value our service, as much as we do.

If you would like to speak to us about a medium to long term strategy for your pension provision, please contact us to arrange a meeting in our office in central Teddington by calling Tim Norris on 020 8614 4780 or emailing him at Tim.Norris@fpgonline.co.uk

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