If you are approaching retirement age, it is likely you are relying on receiving the new State Pension when you become eligible.
Although the State Pension may not fund your entire retirement lifestyle, it acts as a foundational fund that will be supplemented by your private pension, and any other savings you have.
Now that inflation has reached a 40-year high according to the Office for National Statistics, ensuring you are eligible for as much State Pension as you can is crucial. As of the 2022/23 tax year, the full new State Pension is £185.15 a year, or £9,627.80 a year.
However, back in 2016, the new State Pension rules changed. Now, even if you have worked enough “qualifying years”, you may not be eligible for the full State Pension.
Luckily, there are steps you can take to reclaim your eligibility. Read on to find out how the State Pension rules have shifted, and how you can ensure you receive the maximum State Pension possible.
You must have worked 35 qualifying years to be eligible for the full new State Pension
In order to receive any State Pension, you must have worked for 10 qualifying years in the UK. To get the full new State Pension, you need to have worked for 35 qualifying years.
In order for a year of work to count towards your State Pension eligibility, within that year you need to have either:
- Earned enough in employment to pay National Insurance contributions (NICs)
- Been self-employed and paying NICs.
In addition, some benefits including Child Benefit, Jobseeker’s Allowance, Employment and Support Allowance, or Carer’s Allowance, can boost your eligibility.
Remember, if you reached State Pension Age before 2016, the new State Pension does not apply. Instead, you will receive the basic State Pension.
If there are gaps in your record, you have until April 2023 to make up the difference
Although you may have worked all your life, there could be gaps in your National Insurance (NI) record that might prevent you from receiving the full new State Pension.
These gaps can be attributed to many different life events, including:
- Taking time off work to raise children
- Being unable to work for a long time due to ill health
- Working abroad and paying tax in another country
- Years where you did not earn enough to pay NICs.
Fortunately, if there are years between 2006 and 2016 where you didn’t qualify, you can manually back-fill your NICs for those years.
Indeed, even if you didn’t pay NICs at the time, you can make up the difference now, helping you to become eligible for the full new State Pension when you reach retirement age.
To do this, you need to check your NI record on the government website, where you can find out how much, if anything, you would need to pay in voluntary NICs.
However, if you haven’t yet explored this option, time is running out. Indeed, any unpaid NICs between 2006 and 2016 need to be made up before April 2023, at which point the opportunity will no longer be available to you.
If you leave it too late, you may lose eligibility for the full new State Pension. Crucially, even if you think you already qualify for the maximum amount, it may still be beneficial to review your NI record just in case.
Checking your record as soon as possible will give you the time to pay any voluntary NICs if you wish, so you can gain the peace of mind that when you reach State Pension Age, you will receive the amount you deserve.
Working with your financial planner can help ensure you receive the State Pension you have planned for
If you are unsure whether you are currently eligible for the full new State Pension, we can help.
We can work with you to review your National Insurance record, and assist in the process of paying voluntary NICs if necessary.
By staying ahead of the curve and back-filling any unpaid NICs this year, you can look forward to your retirement, safe in the knowledge you may receive the correct State Pension amount when the time comes.
If you have any further questions about how the State Pension is paid, or how the rules are changing, contact your financial planner for guidance.
Get in touch
For retirement advice that can provide invaluable peace of mind, get in touch. Email firstname.lastname@example.org or call 0161 8080200.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.