Have you checked your NI contributions?
Posted on 15th February 2023 at 16:41
This content will be shown in the summary on the main blog page. Click on this text to edit it.
You might have a shortfall and that will impact your pension.
It is a very simple process to check how many qualifying years you have on the Government Gateway and the government has given a grace period which closes on April 1st 2023. I would suggest it would take time to get the paperwork in place, so don’t leave this to the last minute. You can go back to tax year 2006/07 which is an additional 10 years on top of the normal 6 years you can carry back to.
This may not apply to you but it may well impact on members of your organisation or teams. Do encourage your staff to check as it’s quick and could make a big difference at retirement.
How many years do I need to have contributed to get the full state pension?
In April 2016 the Government introduced new rules and increased the number of qualifying years needed from 30 to 35. If you do not have 35 qualifying years your state pension will be lower.
Why might you not have paid enough NI contributions?
There are certain categories of self-employed that may not have paid Class 2 contributions through self-assessment:
Were you ever a minister in a religious organisation and did not receive a salary or stipend?
Have you run a business involving property or land?
Are you an investor for yourself or others but not as a business and without getting paid either through a commission or a fee?
Interestingly this also includes exam invigilators, moderators and those who set the exams.
Why might you want to pay additional contributions if you have underpaid?
Maybe you live abroad or you have parents who live abroad and you want to make sure you receive some benefits.
You have been or still are self-employed and have not paid class 2 as you have had low profits or losses and this has meant no contributions would have been made for those periods of time.
You are getting closer to retirement age and are starting to make plans for your pension and need to optimise on your income levels at retirement.
Is this worth doing?
COn average we now live until we are in our mid 80’s. In fact, the most recent figure for 2018-20 in England is 86.1 years. This means if we retire at 66 we are going to have 20 years of retirement.
It would cost just over £8000 to buy back 10 years of missed contributions and that would give you a boost of around £55,000 on your pension over that 20-year period.
If you have a terminal illness and may not survive longer than 4 years into your pension, it may not be worth it. Likewise, if you are younger and your pension seems a long way off or finding the additional capital may be impossible before the deadline.
Topping up your pension may not be the right course of action for everyone, so it is always wise to talk it through with your financial adviser before making any payments.
If you don’t currently have a financial adviser you work with, I am happy to have an initial chat with you to highlight the pros and cons of the pension top up offer.
Tagged as: Pension top up
Share this post: