I am a 53-year-old woman and recently requested a state pension forecast to see if I was on track to receive the full amount when I reach 67. Since the government rule change that means I now have to have 35 years’ national insurance contributions (NICs) rather than 30.
So I fall short by two years. Due to my circumstances I will not be able to make any more NICs, but I understand that I can pay a lump sum to purchase these two additional years.
One year is around £220 and the other around £600. Should I pay this extra lump sum to ensure I have the full 35 years of contributions? What benefits would this give me?
Those who reach state pension age from 6 April 2016 need 35 qualifying years to be entitled to the full state pension. These qualifying years can be accumulated through either national insurance contributions or through credits. Credits could apply, for example, during periods of unemployment, sickness or when working as a parent or carer.
Those who have gaps in their national insurance records have the option to voluntarily purchase extra qualifying years. This can be done by making either Class 2 or Class 3 NICs depending on your circumstances.
You have been very sensible in getting a state pension statement. This has given you a good understanding of your likely position and pension entitlement. Unfortunately, there isn’t a straightforward answer to whether you should now make voluntary national insurance contributions to boost your pension.
You say that you’re not able to pay any further NICs, but depending on your circumstances it could be that you’ll be entitled to credits which could still boost your number of qualifying years. Also, is there any possibility that your circumstances could change in the next 14 years before you reach state pension age?
If you make additional voluntary NICs now and then subsequently accrue two further qualifying years of contributions or credits, then you’ll be making the payment but getting no benefit from it.
While making these contributions now might seem like an attractive option, a sensible alternative could be that you don’t make these payments now and review your situation again when you’re much closer to State Pension Age. You can then make any decisions based on your actual entitlement and also considering other factors such as your personal circumstances and state of health at that time.