Martin Lewis issues ‘do it now’ warning ahead of major deadline for state pension boost worth £1,000’s
MARTIN Lewis has issued a warning ahead of a fast approaching deadline to help workers boost their state pension.
The financial guru warned listeners of his podcast about the “importance of buying National Insurance (NI)” shares to boost their state pension.
Workers have until April 2025 to buy back any missing National Insurance years from 2006-2016.
These NI contributions are essential to making sure you get the maximum amount of state pension.
It is not uncommon for workers to choose to buy years they were missing to ensure they meet the full qualifying years for the state pension.
You usually need 35 years of National Insurance contributions to qualify for the full state pensions, which is £221.20 a week.
Martin said: “Many people are missing past National Insurance years, commonly because they took a year abroad, had low incomes, took career breaks, or they weren’t claiming some of the National Insurance credits that they are entitled to.”
Usually there are strict time limits on buying back these years.
But when the new state pension was introduced back in 2016, it was relaxed to help people with the transition.
This was supposed to end in April 2023, but was then extended until April 2024.
However from May 2025, you will only be able to buy back six tax years starting from 2019.
While there are still a few months to go till this deadline ends, Martin has urged followers to “just get on with this and do this now”.
He said this was because you might need to save up or find the money to buy back your contributions.
It can cost around £824 to purchase one year of contributions, however this adds £3,030 to your pension over 10 years.
If your are buying six additional years this can cost £4,945 but adds around £18,180 to you state pension over the next decade.
Remember, you do not have to top up your state pension if you do not want to.
Martin also said there pay be delays in the process which could you slow you down.
In the ‘best bits’ episode which has aired while Lewis is on holiday he said: “Phone lines get clogged up, these things aren’t as quick as you think the sooner you get on with it, you do not want to be leaving this till next March.”
CHECK FOR NATIONAL INSURANCE CREDITS
BEFORE making a voluntary contribution, it is important to check if the gaps in your contributions can be filled with free NI credits.
Thousands are thought to be missing out on these NI Credits, leaving them worse off in retirement.
For example, those on certain benefits should qualify for Class 1 credits.
This includes parents with active claims for child benefit.
You can check the full list of people eligible to claim credits by visiting www.gov.uk/national-insurance-credits/eligibility.
It explains the circumstances where you’ll need to claim and when you’ll get it automatically.
One listener told the podcast how managed to uncover an extra £21,000.
“I asked about my voluntary National Insurance contributions and I was four years short,” they said.
“If I pay £2,536 – because just one of the years cost me only £60- I get an extra £20 a week. Over 20 years I get an extra £21,000.”
How to top up National Insurance contributions and how much you can get
In some cases, buying back missing years can be really valuable.
But earning back the years isn’t free, so your voluntary contributions come at a price.
If you fill gaps between 2006/07 and 2015/16, you’ll pay the 2022/23 rates for contributions.
It is worth £15.85 a week, which means it costs £824.20 to buy one year of contributions.
As the state pension was £185.15 per week in 2022/23, this boost would add £5.29 per week or around £275 per year.
Although you’d have to pay £8,242 (10 lots of £824.20), the annual state pension boost would be around £2,750.
Someone who was retired for 20 years would get back around £55,000 in total (before tax).
Anyone under 73 can make voluntary pension contributions, as it’s assumed everyone under this age will claim the new state pension.
If you’re below the state pension age, you can check your state pension forecast by visiting www.gov.uk/check-state-pension to determine if you’ll benefit from paying voluntary contributions.
You can also contact the Future Pension Centre by calling 0800 731 0175.
If you’ve reached state pension age, contact the Pension Service to find out if you’ll benefit from voluntary contributions.
You can contact this service in several different ways by visiting www.gov.uk/contact-pension-service.
You can usually pay voluntary contributions for the past six years.
The deadline is April 5 each year.
For example, you have until April 5, 2030, to compensate for gaps in the tax year 2023 to 2024.
The deadline has been extended for making voluntary contributions for the tax years 2016 to 2017 or 2017 to 2018.
You now have until April 5, 2025, to pay.
Find out how to pay for your contributions by visiting www.gov.uk/pay-voluntary-class-3-national-insurance.
CLAIMING THE STATE PENSION
YOU won't automatically get the state pension - you need to claim it once you're eligible.
You should receive a letter explaining what to do no later than two months before you reach state pension age.
You can apply for the State Pension online by visiting www.gov.uk/get-state-pension.
You can choose to defer getting the state pension – you don’t have to take it as soon as you are eligible when you reach state pension age.
Leaving your state pension untouched can boost the amount you eventually get.
If you opt to defer your state pension, your entitlement increases by the equivalent of 1% for every five weeks you do so.
As the state system can be tricky to navigate, requesting a state pension forecast is a key part of pension planning.
This will help you understand how much you could be eligible to receive and at what age.
View your State Pension forecast by visiting www.gov.uk/check-state-pension.