How to boost your state pension by up to £250 a year

IF you’re worried you won’t have enough to live off in retirement there is a way to boost your state pension by up to an extra £250 a year. You can do this by buying extra national insurance credits, which are needed to qualify for the state pension. And this could be particularly helpful for […]

IF you’re worried you won’t have enough to live off in retirement there is a way to boost your state pension by up to an extra £250 a year.

You can do this by buying extra national insurance credits, which are needed to qualify for the state pension.

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And this could be particularly helpful for women born in the 1950s who’ve just had a bid to lower their state pension age rejected by the high court.

But it’s complicated, so here’s what you need to know.

How do I qualify for the state pension?

Under the current new state pension, the most you can get is £168.60 a week (£8,767.20 a year).

To qualify for the new state pension you need at least ten years’ worth of national insurance contributions, and to get the maximum you need at least 35 qualifying national insurance years.

Under the basic state pension, which is for men born before April 6 1951 and women born before April 6 1953, the most you can get is £129.20 a week (£6,781.40 a year).

To get the full amount, you need at least 30 qualifying years of national insurance contributions.

Those with qualifying national insurance years made before and after April 6, 2016 come under separate rules that take into account both the old and new style state pensions.

How can I boost my state pension?

National insurance contributions are usually taken directly from your wages if you’re employed or via self-assessment for the self-employed.

People often have gaps if they were unemployed, on a low income, or self-employed.

But if you don’t have enough national insurance contributions to get the full state pension, or even any state pension at all, then you can choose to buy extra credits.

Most people will do this by buying what’s known as class 3 national insurance credits to fill gaps in their pre- April 6, 2016 record at a cost of £15 a week for the 2019/20 financial year.

So get a whole year’s worth, and you’d pay £780.

This may sound like a lot, but it would boost your state pension by 1/30 – the equivalent of £4.30 a week or £223.60 each year.

For those with gaps in their record on or after April 6, 2016, you can add 1/35 to your state pension for life.

In today’s terms, you’d pay the same £15 a week (£780 a year) but you’d get a bigger £4.82 a week or £250.64 a year boost to your state pension.

This means it would take less than four years of getting more from the state pension to recoup the cash you’d have to shell out for contributions in the first place, and you would continue to get this boosted state pension for the rest of your life.

Just bear in mind that you can usually only pay for gaps in your national insurance record from the past six years.

So you have until April 5, 2020 to make up for gaps for the 2013/14 tax year.

Should I boost my state pension?

Firstly, use Gov.uk to check your National Insurance record. Once you know this, you can decide whether you need a top-up.

But the Department for Work and Pensions (DWP) warns that voluntary contributions do not always increase your state pension and the rules are particularly complicated for those who will have built up an entitlement under both systems.

So you should contact the Future Pension Centre to find out if you’ll benefit.

Financial provider Royal London has also put together a guide that helps you to understand your state pension and how to calculate if it’s worth buying extra national insurance credits.

It director of policy, former pensions minister Steve Webb, points out that those on means-tested benefits should bear in mind that an increased pension could reduce benefits such as pension credit or housing benefit.

He adds that those in poor health may also pay more for the contributions than they get back in higher state pension payments if they don’t live long enough.

“The rules for topping up your state pension are complicated. But if you can afford to make voluntary class 3 national insurance contributions, the rewards can be large relative to the cost of doing so,” said Mr Webb.

You may also want to get financial advice before you decide to make voluntary contributions.

And if you decide topping up is right for you, see Gov.uk for information on how to set-up the payment.

New research has revealed that women are £106,000 worse off than men at retirement due to lower paid jobs and part-time work.

While Martin Lewis has issued an urgent pensions warning for millions of workers who could be missing out on £1,000s a year.

But on a more positive note, the state pension could rise by 4 per cent next year – giving the elderly £351 extra a year.

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