Thousands of older Britons with gaps in their National Insurance (NI) record could boost their state pension by up to £77,400. It comes as ministers extended a deadline to voluntarily buy NI contributions.
The full new state pension is currently £203.85 a week and a person typically needs 35 years of NI contributions to get the full amount.
People can usually purchase NI contributions up to six years ago, as far back as 2017/2018 at present.
But the scheme is currently extended by another 10 years meaning people can buy contributions as far back as 2007/2008.
The Government has this week extended the deadline for people to buy contributions over the extended period, and people can now do so until April 2025.
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Figures from interactive investor suggest a person could significantly increase their payments over the course of their retirement even with a relatively small purchase of contributions.
To buy NI contributions, a person has to purchase ‘voluntary class 3 National Insurance contributions’.
These are currently worth £17.45 a week or £907 for a full financial year, which runs from April 6 of one year to April 5 of the next.
As a person usually needs 35 years of contributions to get the full £203.85 a week/£10.600 a year new state pension, each year of contributions is worth 1/35 of this amount, or around £303 a year in payments.
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But this extra £303 a year is set to increase over the coming years, as the triple lock policy guarantees state pension payments increase each year in line with the highest of 2.5 percent, inflation or the rise in average earnings.
The £303 a year boost will increase to £484 a year in 20 years if the state pension increases by at least 2.5 percent, and it could go up by more.
Interactive investor calculated that somebody purchasing 10 years of NI contributions at the cost of £9,070, could increase their state pension by £77,400 over a 20-year retirement, £33,946 over 10 years and £15,927 over five years.
If a person purchased six years of contributions for £5,442, they could get £46,440 over 20 years, £20,368 over 10 years and £9,556 over five years.
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An individual who purchases just one year of NI contributions for £907 would still get a payment boost of £7,740 over 20 years, £3,395 over 10 years and £1,515 across five years.
Low earning self-employed people may be able to pay a much smaller amount in NI contributions and still get an equivalent state pension boost.
Those under the small profits threshold of £6,725 in 2022/2023 and 2023/2024 may be able to buy class 2 voluntary contributions instead.
In this case, they would only need to pay £33.45 a week or £179 for a full year. This means a self-employed person with low earnings could pay £1,794 and boost their state pension by £77,400 over a 20-year period.
Alice Guy, head of Pensions and Savings at interactive investor, said: “The extension of the National Insurance deadline is amazing news for anyone with gaps in their national insurance record and that often includes self-employed people, and anyone who’s taken time out to care for loved ones.”
She said the deadline extension could particularly benefit self-employed Britons, saying: “Self employed people often struggle to save enough for retirement as they don’t have access to a workplace pension and can face periods with a lower income when they can’t afford to pay into a pension.
“So, it’s vital they keep an eye on their state pension and make sure they receive the maximum possible.
“Paying extra voluntary National Insurance contributions can be amazing value if you’ve got gaps in your record.
“You’ll only need to live for four years to claw back the extra contribution and you’ll be seriously in the money if you survive for another 10 or 20 years.”
A person can check how much state pension they are on track to receive and if they can voluntarily buy contributions using the state pension forecast tool on the Government website.
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