Writing today, most men and women start getting their State Retirement pension when they reach the age of 66. However, how much State pension they receive, depends on whether they have worked their 35 “qualifying “years. There are plenty of people who, in their younger days, decided to try and make their fortune by moving abroad. What they did, perhaps unknowingly, was to stop making National Insurance contributions and in doing so, they reduced their entitlement to the full retirement State pension.
Money Saving guru, Martin Lewis, is spot on when he urges those born before 1985 and who have missed National Insurance years, to repurchase these by making voluntary NI contributions. (With a cap of 13 years.) Why? Because in doing so, you could substantially enhance your state pension.
Here is an example:
- You realise you have 13 Missing Years
- The maximum State pension currently is £11,492 pretax p.a. and between now and aged 66 you only have 22 qualifying years (35-13) which guarantees only £7,223 p.a. ( £11,492x 22/35 = £7,223 p.a.)
- You are short of the current maximum by £11,492 – 7,223 = £4268 p.a.
- So, to qualify for the maximum, you need to pay £800 x 13 -=£10,400.
- You pay £10,400, you reach 66 and live for another 20 years. So, without discounting for inflation etc, you paid £10,400 to get an extra £4,268 x 20 years = £85,369: a simple benefit ignoring inflation etc of just short of £75,000.
- The longer you live after reaching the age of 66, the more you will benefit from paying for the missing years. So, if you die 2 years after your 66th birthday, you have only been rewarded by £8,536 – that’s less than the £10,400 you invested.
The deadline for buying back missing National Insurance years from 2006 to 2016 is 5th April 2025 – so you don’t have long.
You can do this by logging onto www.gov.uk (above) or just Googling Voluntary National Insurance.
It contains a helpful summary of what contributions you have made, your missing years, how much to pay, how to make up the shortfall and how to pay.