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The state pension typically hinges on the National Insurance contributions a person makes throughout their lifetime. The more contributions a person is able to build up, the more likely it is they will be eligible for the full state pension.
People can fall short for numerous reasons, however, there may be ways to boost their sum – by paying extra contributions.
Typically, a person can only make voluntary National Insurance contributions for the previous six tax years.
However, a Government initiative has extended that period by a further 10 years.
Up until July 31 this year, it is possible to make voluntary contributions going back to the 2006/07 tax year.
READ MORE: Pension saving for children and grandchildren makes ‘big difference’
St. James’ Place has unpacked some of the figures to show how people may be able to benefit.
Class 3 National Insurance contributions currently cost £17.45 per week or £907.40 per year.
Each year represents 1/35th of the full state pension, and one year’s additional top-up could boost the sum by £5.82 a week or £302.64 a year, based on the current state pension.
If a person has 10 years of missing contributions, they could boost their state pension by £3,026 per year for a one-off payment of £9,074.
Another key issue to consider is tax, as no one wants to pay more than is necessary.
With Personal Allowance limits frozen by the Government, more people may find themselves inadvertently thrown into a tax net as their income swells.
Many pensioners will want to avoid this, particularly as their income is already limited in retirement.
Before rushing to pay voluntary National Insurance contributions, people should check if they are eligible for a top-up in other ways.
For example, grandparents under state pension age who have taken time out to look after grandchildren under 12 could be eligible for the Specified Adult Childcare Credit.
If the parents of the child are claiming Child Benefit, they can transfer the NI credit they will be eligible for to the relevant grandparent.
Others may be eligible for NI credits in other circumstances, such as if they were caring for someone else, or were unable to work due to illness.
However, importantly, voluntary contributions do not always increase a person’s state pension.
As a result, Britons are encouraged to contact either the Future Pension Centre or Pension Service to find out more.
Some may also wish to seek financial advice before they decide to make voluntary contributions.
