Should I buy back my missed pension years?

Published by Michelle Cracknell on 26 September 2018.
Last updated on 26 September 2018

Q

I was made redundant and took early retirement when I was 57. I already have more than enough qualifying years for the state pension. However, I’ve now discovered that as I am no longer paying national insurance contributions (NICs) my future state pension is being reduced each year. Can I make monthly contributions, so my state pension is not further eroded?

I believe I can ‘buy back’ missed years at about £750 a year, but since this only gets back about £240 worth of pension a year, I am not sure whether it is worth spending my savings on this.

From:
AH/Kent

A

To be eligible for the full state pension, which is currently £164.35 a week, you will need to have at least 35 qualifying years of NICs – or credits that you are given as a carer or because you are in receipt of other state benefits – before you reach your state pension age.

We would suggest that you request a state pension forecast through the Gov.uk website or by phoning the Future Pension Centre on 0800 731 0175, which will give you three figures:

  1. The state pension that you are forecast to receive at your state pension age if you continue to make NICs;
  2. The state pension that you will be eligible to receive, based on your national insurance record up to the last tax year;
  3. The amount that would be deducted due to contracting out of the state pension (known as a ‘Contracted Out Pension Equivalent’ – COPE).

The forecast will also include a breakdown of your national insurance record.

If you are thinking of making voluntary NICs, you can speak to the Future Pension Centre and request a discussion with a voluntary national insurance contribution specialist who can talk you through the options available to you.

Each voluntary NIC of £761.80 will buy you another £244 a year of state pension (based on 2018-2019 state pension amounts). It will depend on your personal circumstances (health, other savings, etc) as to whether this represents good value.

This article was written in response to a reader’s question. If you have a financial or work/career question that has left you scratching your head ask our panel of experts who will aim to shine some light on the matter.

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