“I was made redundant and took early retirement when I was 57. I already have more than enough qualifying years for the state pension. However, I’ve now discovered that as I am no longer paying national insurance contributions (NICs) my future state pension is being reduced each year. Can I make monthly contributions, so my state pension is not further eroded?I believe I can ‘buy back’ missed years at about £750 a year, but since this only gets back about £240 worth of pension a year, I am not sure whether it is worth spending my savings on this.”
To be eligible for the full state pension, which is currently £164.35 a week, you will need to have at least 35 qualifying years of NICs – or credits that you are given as a carer or because you are in receipt of other state benefits – before you reach your state pension age.
We would suggest that you request a state pension forecast through the Gov.uk website or by phoning the Future Pension Centre on 0800 731 0175, which will give you three figures:
- The state pension that you are forecast to receive at your state pension age if you continue to make NICs;
- The state pension that you will be eligible to receive, based on your national insurance record up to the last tax year;
- The amount that would be deducted due to contracting out of the state pension (known as a ‘Contracted Out Pension Equivalent’ – COPE).
The forecast will also include a breakdown of your national insurance record.
If you are thinking of making voluntary NICs, you can speak to the Future Pension Centre and request a discussion with a voluntary national insurance contribution specialist who can talk you through the options available to you.
Each voluntary NIC of £761.80 will buy you another £244 a year of state pension (based on 2018-2019 state pension amounts). It will depend on your personal circumstances (health, other savings, etc) as to whether this represents good value.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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