Should I pay extra to boost my state pension?

13 December 2016

Q

Please can you help me sort out my state pension. I am a 61-year-old woman and I received a state pension forecast in June telling me I have accrued 44 years of national insurance contributions (NICs) and, as a result, my state pension estimate is £165.52 a week.

However, that was based on my NICs up to 5 April 2015. I was made redundant 18 months ago and have been unable to find another job. I claimed unemployment benefit for six months. This means I now have a 28-week gap in my NICs for the 2015/16 tax year.

From what I understand, I can pay Class 3 Voluntary Contributions of £394.80 to plug the gap. My state pension summary indicated that I could then get £165.52 a week, an increase of £1.77 a week.

I would be grateful for your advice on whether it is worth me making the lump sum payment for such a small weekly gain.

From
JH/Reading

A

It is probably not possible for you to top up your pension, but it’s not 100% certain from the details that you have provided.

The reason is that the ‘starting amount’ for your state pension is already in excess of the full flat rate of £155.65 under the new state pension. It looks like your starting amount for your state pension is based on the old system.

When the new state pension was introduced, a check was done to see if you had already built up more than the £155.65. If you had, you would be given a ‘starting amount’, which effectively protected what you had already built up by April 2015, when the new state pension came into force.

 

The old state pension is a bit more complex than the new state pension as it is broken down into two parts; your basic and additional state pension. Only if the basic element of the total is less than the maximum permissible would you be able to make voluntary NI payments to plug any gaps and top it up.

You needed to have worked for 30 years to get a full basic state pension (around £119); and as you have worked for 44 years, almost certainly there won’t be any scope to pay top-ups via Class 3 contributions.

This also means that the NI credits you would have received when you were on unemployment would probably not have had an impact on your state pension. But to confirm the latest position, you may wish to get a more up-to-date pension forecast. You can also ask them if there is scope to make Class 3 contributions, but from what you have told me I suspect you won’t be able to.

 

How to get a state pension forecast

The Department of Work and Pensions (DWP) can give you a state pension forecast that would tell you how much state pension you are on track to get and how many years of National Insurance Contributions are on your record.

You can get a forecast at  Gov.uk/check-state-pension or by calling 0345 3000 168, or by writing to The Pension Service, 9 Mail Handling Site A, Wolverhampton, WV98 1LU.