MOST workers in the UK will be entitled to a State Pension in their late 60s.
But many people don’t realise the amount you receive varies – and there are simple tricks to boost your retirement pot.
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Linda Baharier, 69, boosted her retirement income by £1,014 annually by paying voluntary National Insurance Contributions (NICs) and delaying when she took her State Pension.
Thinking ahead during her working years meant Linda was able to boost the total she might be eligible for by 60%, from £116 a month to £194.
The State Pension is a regular payment from the government, which you can claim if you have at least 10 years of National Insurance contributions (NICs)
The current State Pension age is 66, but there will be a phased increase to 67 within the next five years, and eventually 68.
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The amount of cash you get in retirement is based on the number of years of National Insurance Contributions (NICs) you make.
People end up with gaps in their NICs for a number of reasons, for example parents who stay at home for a period to raise children or people who earn less than the threshold to be automatically eligible.
Those most likely to be affected are carers, couples and higher earners and it’s estimated that hundreds of thousands could be missing out.
Linda made the decision to pay voluntary NICs after moving to Israel when she was 28-years-old, to boost her pension.
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“I didn’t know how long I was going to be in Israel, so I wanted to keep contributing towards my British pension,” Linda explains.
“I worked as an accountant and for a union before leaving the UK, so I knew about the different classes of National Insurance and how pensions worked, which many people don’t.”
Thousands of pounds better off
Linda, from Surrey, had 13.5 years of Class 1 NICs when she left the UK.
This meant she was already over the 10 year minimum to make her eligible for the benefit.
She ended up staying in Israel for 18 years and paid Class 3 NICs for 16 of them.
Linda told The Sun: “It started at about £8 a month, so £96 a year, but went up annually.
“I must have paid about £1,600 in all over 16 years.”
Class 1 contributions are made by you and your employer when working.
Class 3 contributions are a voluntary payment which fills in gaps in your National Insurance record, so that you can qualify for the State Pension or boost the amount you receive.
You can usually only pay for gaps in your National Insurance record from the past six tax years, but as Linda paid the voluntary contributions at the time, she was able to contribute throughout the entire period she was living abroad.
Without topping up, Linda would only have had 20 years of NICs.
Over a 20 year retirement, these credits could be worth £5,335 a year currently, data from pensions consultants LCP reveals.
But as the amount of State Pension rises each year, it becomes worth more over time, so next year the credit will be worth £5,501.
Helen Morrisey, pension expert from Hargreaves Lansdown, says making up gaps in your National insurance record is a great way to boost your State Pension.
She advises people to get a State Pension forecast, which will highlight any gaps in your contributions.
You can do this on the government website at gov.uk/check-state-pension.
She adds: “It’s worth checking if you were eligible for benefits such as Child Benefit, Jobseeker’s Allowance or Universal Credit during any of these gaps as these come with a voluntary National insurance credit and you may be able to backdate a claim so you can get these credits.
“If you don’t qualify for benefits during any of these periods you can buy voluntary NI credits.”
The cost of filing in gaps is more now than when Linda made hers – but it still means you’re likely to get more in retirement than you pay in to top up – though you should check carefully if it’s worthwhile in your circumstances.
Helen said: “Men born after 5 April 1951 and women born after 5 April 1953 have the opportunity until April 2025 to make up gaps going back to 2006.
“Ordinarily you can only go back six tax years. You will pay £15.85 per week for Class 3 NI which means a full year costs around £823.
“For each year bought you receive 1/35th of your State Pension which equates to just over £300 extra per year for someone on a full new State Pension.
“It is really important to speak to the Future Pension Centre before handing over any money as they can let you know if you really will benefit from the extra payments.”
You can contact the Future Pension centre in a number of ways, including phone and post.
You can find the numbers and address at gov.uk/future-pension-centre.
Vital boost
Linda now receives £775 every four weeks through her State Pension.
Although she now has the full years to qualify for the maximum amount, currently £203.85 a week, she receives slightly less as she has a local government pension from her time working for a local authority.
Her payment is reduced by £14.75 a week to £194, under separate rules, although she is not happy about this “slight of hand” reduction and feels she has been unfairly penalised.
Usually a lower State Pension is a result of what’s known as “contracting out”, where people paid in less National Insurance while working under rules for the old State Pension.
“At that time, I thought I would get a full pension,” she says. “I did not know that the Government would say that if you have a Local Government pension, you will get a deduction regardless of what you paid in.”
As a result, Linda says the boost to her income has been essential as she still struggles to make ends meet in retirement despite thinking ahead.
As well as her State Pension, Linda has a local authority pension of £340 a month and a teaching pension of £65 a month.
“This makes her total income £1,180, which doesn’t cover her £1,389 a month rental costs – let alone other expenses.
Linda receives some housing allowance to help with rental costs and continues to work part-time as an accountant from home to earn additional income.
“I live in a very ordinary 1950s house, but it’s owned by the National Trust and they have a thing about charging market rates, even though they have no expenses, so I can no longer afford my rent without support,” Linda explains.
“It means I still have to earn through the accountancy work as without that I couldn’t do anything.”
It’s worth noting that the State Pension alone is unlikely to be enough to live off – here’s how much you’ll need for a comfortable retirement.
Wait for extra cash
Linda also added to her State Pension by delaying taking it for a few months after she was eligible.
She turned 67 in November 2020, but waited until the following April to benefit from another boost at the start of the new tax year.
By waiting five months, Linda boosted her pension by 2.4% – or just under £5 a week – as your State Pension increases every week you defer for at least nine weeks.
The pension increases by 1% for every nine weeks deferred, which works out as just under 5.8% for every year.
The additional amount is paid with your regular State Pension payment.
Helen Morrisey says you can add up to £614 by delaying your State Pension for a year.
She says: “If you can afford to do it, then deferring taking your State Pension is a great way of boosting how much you get.
“If you want to defer, then you don’t have to do anything as you don’t receive State Pension automatically – you need to claim it.
“It’s also important to consider your whole financial situation when considering deferring State Pension or buying extra contributions.
“For instance, receiving the extra income may affect your entitlement to benefits and mean you are worse off overall.”
As well as checking your forecast and contacting the Future Pensions centre, you can speak to a benefits adviser at organisations like Turn2US, Citizens Advice or Age UK.
A spokesperson for Age UK says: “You can decide whether to make additional voluntary contributions by weighing up their cost against the potential gains in entitlement.
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“There may be potential losses in means-tested benefits like Pension Credit to consider.
“There are other options like deferring claiming your State Pension which can, in some cases, increase the amount you receive when you do claim, or in limited circumstances, you can receive increases based on your partner’s NIC record but that gets very complex very quickly.”
