Some people could get a higher pension for life

An outlay now could boost your state pension, says Paul Lewis

Published: June 30, 2022 at 3:29 pm

Anew, free online service has been launched to help people boost their state pension by paying extra National Insurance contributions. The service, from former Pensions Minister Sir Steve Webb and actuaries Lane Clark & Peacock, is for people on the new state pension – men born on or after 6 April 1951, and women born on or after 6 April 1953 – whose state pension is under the full amount of £185.15 a week. (If you were born before those dates you get the old state pension; it’s now too late to fill gaps in your contribution record.)

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Two groups may find that paying a few hundred pounds now will give them a higher pension for life – index-linked:

1 Those who paid for fewer than 35 years. You need 35 years of contributions to get a full new state pension. If you have fewer than that, you can fill gaps back to the year 2006/07 – you must do this by 5 April 2023. Each year’s contributions will cost up to £824. Every missing year filled increases your pension by £5.29 a week – about £275 a year – so it “pays back” in three years (four if you pay tax).

2 Those who paid into a company or personal pension. Many who have paid 35 years’ contributions or more get a reduced state pension because they paid into a pension scheme “contracted out” of the State Earnings Related Pension Scheme (SERPS). They paid lower contributions, so their state pension is reduced. Most affected worked in the public sector or private firms with a good pension; some paid into a “contracted out” personal pension.

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Each year’s contributions from 2016/17 to the year before you reach state pension age will boost it by £275 a year. If you have been working, they’ll usually have been paid via your job. If not, you can pay them now: they’re called Class 3 contributions (or Class 2, for self-employed). First, check if it will boost your pension; find out how at lcp.uk.com/statepensionboost.

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Paul Lewis presents Money Box on Radio 4.

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