You may already know there is an opportunity to make up for any “lost years” regarding your state pension. There can be various reasons for these lost years, but the important point is that the 5th April 2025 deadline is approaching quickly. It’s essential now to familiarise yourself with the state pension rules.
The state pension is a regular payment in your retirement that most people can claim when they reach state pension age. The amount of state pension you receive now depends on the number of “qualifying years”. You will need at least 35 years of contributions.
You can still be of working age but it’s still good to get familiar with the state pension rules. This is especially important if you know you’ve had gap years where you were not working or doing other things.
There is currently a unique opportunity to address gaps in your National Insurance (NIC) records from 2006 to 2018. After the deadline, the rules will revert to the standard, which allows you only to go back six years. So, if you have any gaps, please have a look at your state pension forecast now before deciding what to do next.
Another way to check your NIC records is to log into your personal tax account. Haven’t got one? Don’t worry you can set one up. Instructions are included in the last paragraph.
How is the state pension calculated?
To qualify for the full state pension, you will need to make qualifying payments for at least 35 years. A qualifying payment for NIC is either :
- Class 1 NIC payments are deducted from your salary if you are employed.
- Your salary is above the lower earnings limit, which in 2025/2026 will be £6,500 per annum.
- You are paying Class 2 NIC as a self-employed person.
- Or you are paying Class 3 voluntary NIC.
- Other pension credits (see below)
As a side note although payments above the lower earnings limit currently do not result in a National Insurance contribution (NIC) liability, they do still earn you credits towards your state pension.
Starting next month, if you are running your own business, it is important to draw a salary of at least £6,500 each year. This will incur a small NIC liability, but it ensures that you are making contributions towards your retirement pension.
If you are not familiar with this change have a look here
Gaps in my National Insurance contributions?
At this stage, you either know you’ve nothing to worry about or you know you may have gaps. Now you may have already addressed those gaps but if not now is the time to address this issue.
To get familiar with the state pension rules, the first thing to do is check your forecast for the state pension because everyone has different personal circumstances. If you don’t think you will have a minimum of 35 years of contributions, we suggest that you contact the Future Pension Centre (FPC).
Alternatively use the above state pension forecast link if you find that easier to check yourself first.
You may have experienced times of illness, taken care of children, or been unemployed for a period. In these situations, there are provisions in place to ensure you receive credits for your national insurance records. It’s important to check your records now.
The FPC will be able to check your record and if any further NIC will be of benefit to you and will discuss making the extra Voluntary NIC payments.
After identifying the gaps, you can determine if additional contributions are necessary. The FPC should talk you through this but if we are representing you, please feel free to contact us if you so wish.
What next?
As you can imagine the phone calls to FPC are now busy if you need to make payments.
If you suspect you may have a shortfall or have checked your personal tax account which confirms it, you need to register a call with FPC before the April deadline.
We’ve heard that if you register your call even if you make the payment after the 5th April deadline it will still count.
This is important to those of you who might be approaching the state retirement age in the next few years.
Personal Tax Account – Sign up now
If you haven’t yet taken the step to sign up for your Personal Tax Account (PTA), we highly encourage you to do so.
Why, you ask? Because it opens the door to a treasure trove of information at your fingertips.
You can explore your state pension forecast and discover any years that may be missing. It also provides comprehensive details about Child Benefit, ensuring you have everything you need in one place. Plus, with the PTA, you have the power to review and adjust your PAYE code, putting you in control of your tax situation. Don’t miss out on this invaluable resource!
You can sign up to PTA using the link here
Myers Clark helps clients feel calm and confident about their taxes. We alleviate the heavy burden of your tax affairs, so you don’t have to. Here’s how we help