State pension warning: Your National Insurance contributions may not be qualifying – why?

Budget 2021: Experts outline state pension changes

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State pension income requires at least 10 years of qualifying National Insurance (NI) contributions, with 35 years needed to get the full new state pension amount of £179.60 per week – although some may get a different amount. However, there are clear rules on what counts as a qualifying year and if the contributions fall outside these parameters, they may not count towards a state pension record.

Qualifying NI years

Qualifying contributions can be received by those who are in or out of work. When a person is working, they’ll get a qualifying year if they’re employed and earning over £184 a week from one employer or they’re self-employed and paying NI contributions.

People may not pay NI contributions because they’re earning less than £184 a week. They may still get a qualifying year if you earn between £120 and £184 a week from one at least employer.

Where Britons are not working, they may get NI credits if they cannot work, for example because of illness, disability, being a carer or being unemployed. For example, a person can get NI credits if they claim Child Benefit for a child under 12, get Jobseeker’s Allowance or Employment and Support Allowance, or get Carer’s Allowance.

Where a person has gaps in their NI record, they may be able to fill them by making voluntary contributions.

Gaps in a NI record

It’s possible to claim a National Insurance statement from HMRC to see one’s record. To do this, people will first need to get a state pension forecast which can be requested through the Government’s website.

From here, a National Insurance statement can be applied for through HMRC’s website. Where gaps are spotted, voluntary contributions may help.

It should be noted voluntary contributions do not always increase a state pension and before taking action, Britons should contact the Future Pension Centre to find out if they’d benefit.

Britons must be eligible to pay voluntary NI contributions for the time the contributions cover. It is usually possible to pay for gaps in an NI record from the previous six years. Voluntary contributions are split between class two or class three contributions, which are dependent on one’s employment status.

Those who are eligible for NI credits or who are married women or widows paying reduced rates cannot pay voluntary contributions. Additionally, voluntary contributions are not made free of charge.

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Currently, it costs £3.05 per week to make voluntary class two contributions. For class three contributions, this rises to £15.40 per week.

If a person is paying class two contributions for the previous tax year or class three contributions for the previous two tax years, they will pay the original rate for those tax years. For those unsure of their options, HMRC can be called for help.

Both classes of voluntary contributions are paid online through the Government’s website and they can be covered through direct debits, cheques, CHAPS and other methods.

Voluntary contributions must be paid by April 5 each year and currently, Britons have until April 5, 2022 to make up for gaps in the tax year 2015 to 2016.

State pension eligibility

For the new state pension, men will be eligible if they were born on or after April 6, 1951. Women will be eligible if they were born on or after April 6, 1953. The earliest a person can get their state pension is when they reach their state pension age which is 66 for most people.

State pensions can be claimed up to four months before a person reaches their state pension age and claims can be made online, over the phone or through the post.

Initial payments can take up to five weeks to come through and beyond this, payments will arrive once every four weeks.

Claimants may get part of a payment before the first full payment comes through but the DWP will send letters to applicants explaining what to expect.

While most people will reach their state pension age on their 66th birthday, it is possible to get an exact retirement date through the Government’s website. The Government has a state pension age forecasting tool which breaks down when a person will reach their state pension age and when they’ll be able to claim Pension Credit or free bus travel.

To begin with, users will need to identify if they’re trying to find out their state pension or free bus pass age. Users will then need to enter their date of birth.

The final screen will present users with an exact date for when they’ll reach their state pension age.

This will be important to note for many over the coming years as the Government plans to raise the state pension age. Under the current schedule, the state pension age will rise to 67 between 2026 and 2028.

Beyond this, it will rise to 68 by 2046.

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