Eight reasons why you might NOT get the full state pension – from childcare responsibilities to contracting out

THE state pension, worth £221.20 a week, provides a stable income for most Brits once they reach the age of 66.

However, for most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings. 

And not everyone gets the same state pension, and what you are awarded depends on your National Insurance record.

The full rate of the new state pension is £221.20 a week – or £11,502.40 a year.

This is what the state pays those who reach state pension age after April 6, 2016.

The full basic state pension under the old system is £169.50 per week and is paid to those who retired before April 6, 2016.

There are many avenues future pensioners can take to ensure they can top up their state pension forecast ahead of retirement and ensure they receive the full amounts.

However, it’s first important to recognise why you might not receive the full UK state pension, and we’ve explained who’s most likely to be affected below.

1. INSUFFICIENT YEARS

To receive the full new state pension, you need 35 qualifying years of National Insurance contributions or credits.

You need 30 qualifying years to qualify for the basic state pension (for those who reached the state pension age before April 6, 2016).

If you have gaps in your National Insurance record due to periods of unemployment, living abroad, or not paying NICs for other reasons, these can affect your entitlement.

2. INSUFFICIENT EARNINGS

Another reason you might find you have gaps in your NI record is because you you didn’t earn enough for several years.

If you work and earn above the Primary Threshold – currently £242 a week – then you automatically start paying National Insurance and build qualifying years towards your state pension.

But, if you earn above the Lower Earnings Limit (LEL) – currently £123 per week – you would not pay NI and therefore wouldn’t get a credit.

If you earned under the limit for an extended period of time then you may have holes in your record from that time.

3. UNEVEN WORK PATTERNS

Working part of a year on the LEL level but working the rest on a higher wage could cause problems too.

Just because you paid some NI in a given year, doesn’t mean you paid enough NI to get a “qualifying year’” towards your state pension.

If you earned at the LEL through the year then you would get a qualifying year towards the state pension.

 But if you only worked part year, then it’s more complicated.

The issue of having a “part year” could arise if you had a gap between ending one job and starting another, or if you took six months in a to go travelling and didn’t pay NI. 

4. CHILDCARE RESPONSIBILITIES

There are several reasons why someone may have gaps in their national insurance record.

One of them is if they took time out of the workforce to look after children.

If you didn’t claim child benefit during that time, you’ll likely have some gaps.

This is because you’re rewarded with National Insurance credits when claiming child benefit.

So, if you opted out of receiving child benefits, then you could have gaps.

However, paying to plug these holes in your record may not be necessary in this case.

Before paying for voluntary National Insurance credits, it’s worth seeing if you can backdate a claim to receive the credits for free through these benefits.

However, it’s worth noting, though, that this is not a sure thing, and child benefit payments are usually only backdated by up to three months.

5. UNEMPLOYMENT

The same goes for if you were unemployed and didn’t claim benefits at the time.

So, if you could have claimed Universal Credit and jobseeker’s allowance when you weren’t working but didn’t, you could fill the gaps for that period.

Again, these benefits come with National Insurance credits, so if you qualify, then see if you can backdate a claim.

Other benefits like employment and support allowance and carers allowance also provide National Insurance credits.

6. SELF-EMPLOYMENT

If you were self-employed for any period during your working life you may have gaps in your record too.

That’s if your business made small profits during that time and, therefore, you didn’t make any NI contributions.

In this case, topping up could be an easy way to fill the gaps you created in that period.

7. CONTRACTED OUT

Another key reason why you may have gaps is if you were contracted out of the state second pension (S2P) at any point.

This is the additional state pension, which is an extra amount of money you could get on top of your basic state pension if you’re a man born before April 6, 1951, or a woman born before April 6, 1953.

In exchange for giving up all or part of S2P you made lower NI contributions and received an extra boost to your workplace or personal pension instead.

Paying less NI means many people have gaps in their record, but the trade-off is that they receive an extra boost to their private pension instead.

Contracting out has since been abolished, but it is a big reason why many people find they are on track to receive less state pension than they thought.

In this case, buying extra voluntary credits may not affect the amount of state pension you end up with when you retire, though.

8. LIVING OVERSEAS

If, at any point in your working life, you lived or worked outside the UK, you too could benefit from topping up.

That’s because when you leave the country to travel or work abroad, you will stop paying NI.

This means that, in turn, you’ll also stop gaining contributions for your record and could end up with gaps of multiple years.