I requested a state pension forecast in 2015 and was told that because I only had nine qualifying years I would not be able to receive a state pension. I then received a letter in 2016 saying that I could pay for shortfalls.
My question is, should I pay for one year, so I am at least eligible for the minimum amount when I reach state pension age in 2023?
I was self-employed from 2009 and was given a small earning exception certificate from November 2013 to April 2016. I left self-employment in 2016.
I understand that your state pension forecast estimated that you would only have nine qualifying years at the time you reach your state pension age. However, as you have had a complex employment history, with periods of employment and self-employment, you may find that the number of qualifying years quoted is incorrect.
You can request a statement of your national insurance contributions (NICs) record from HM Revenue and Customs (HMRC). You can either complete the online form at Online.hmrc.gov.uk/shortforms/form/NIStatement or call 0300 200 3507.
Once you’re certain of your state pension entitlement, you then have three options:
- Carry on working and gain additional qualifying years.
- Receive NICs in future years, either automatically as a result of being in receipt of certain state benefits (for example, carer’s allowance and jobseeker’s allowance) or by applying for them (for example, if you are married to or in a civil partnership with a member of the armed forces and accompany them on a posting outside the UK).
- Depending on your circumstances, consider paying Class 3 voluntary NICs (VNICs) for past or future tax years if you will not reach the full amount through the previous two options.
In respect of Class 3 VNICs, you can usually only pay for gaps in your national insurance record from the past six years. The rate for the current 2018-2019 tax year is £14.65 a week for Class 3. You have until 5 April 2019 to make up for gaps for the tax year 2012-2013.
People who were born before certain qualifying dates and have reached retirement age also have six years to make extra contributions to increase their pension (see Gov.uk for details).
You should think about how much you can afford to pay in VNICs. You will get a proportion of the new state pension if you have between 10 and 35 qualifying years, so if you do pay for more than one year of NICs, you will receive the benefit of the state pension, which is a guaranteed inflation-proofed income.
However, you should also consider other ways to save for your retirement, such as contributions into a workplace or private pension or other long-term savings vehicles.