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Crunch deadline to buy state-pension top-ups pushed back to 31 July

Here's Money reader Sue Murtagh trying to get information from DWP about buying top-ups:

Deadline to buy state pension top-ups pushed back to July, after growing anger among savers over telephone collapse at DWP and HMRC

  • People trying to top up the state pension will have until July 31 to buy additional top-ups
  • This is Money exclusively revealed the phone block last month
  • We have sent DWP and HMRC a file of readers’ cases and attached appeals for extension

Here's Money reader Sue Murtagh trying to get information from DWP about buying top-ups:

Here’s Money reader Sue Murtagh trying to get info from DWP on buying top-ups: “I’m always in the queue or I’m cut off”

The government bowed to pressure and extended a critical deadline to buy additional pension top-ups after frustrated savers jammed its phone lines for weeks.

People trying to increase their pension payments will now have until July 31 to do so at current rates of up to £824 for each year, and less for a part-year gap.

This is Money exclusively revealed the phone standoff last month, and the government said days ago it could accept late payments on a case-by-case basis, as the Liberal Democrats tried to force an extension until ‘in 2025.

Today Treasury Financial Secretary Victoria Atkins said: ‘We have listened to concerned members of the public and have taken action.

Buying state pension top-ups can give a generous boost to retirement income if you buy or fill in the right years, and at present the usual six-year deadline is being extended to 2006/ 07 – a special deal that was due to expire on April 5.

It can be difficult to determine which years, if any, will benefit you individually, and the government itself and other money experts warn you to check with the Future Pensions Center before handing over your money.

Sue Murtagh, pictured above, was among many This is Money readers who contacted us complaining that they could not reach the Department for Work and Pensions – prompting us to send her a dossier of around 20 cases and to join calls for the deadline to be pushed back.

Ms Murtagh, a 54-year-old retired bank worker from North Yorkshire, wanted to know if buying top-ups covering six years at a cost of around £4,700 would improve her state pension.

“I’ve been trying to reach someone on the phone for a few weeks now and after going through the rather laborious automated phone system at the Future Pensions Center I’m permanently in the queue or I’m cut off,” we were told. -she says.

“Going all the way and suddenly getting an engaged tone is so frustrating!”

Steve Webb, a former pensions minister and now a partner at LCP, had also called for an extension after his This is Money column’s inbox was filled with complaints.

Will buying supplements increase YOUR state pension, and how much does it cost?

Buying supplements to increase your state pension can be very profitable.

A year of voluntary ‘Class 3’ National Insurance contributions usually costs £824.20, and if you fill in gaps in a year where you have already paid NI contributions, it will be less.

“In many cases this will increase state pension entitlement by 1/35th of the standard rate, or around £275 a year,” says Steve Webb, who has developed a tool to help people with top-ups here .

“That means someone who completes a year will get their money back within four years of withdrawing their pension, even taking into account the basic tax rate.”

Webb says someone who collects a state pension for 20 years will recoup £4,400 (net of basic tax) on an initial outlay of £824.20.

But he warns that filling in the blanks for certain years – particularly those before 2016/17 – can sometimes have no impact on your state pension, particularly if you’ve been contracted out and have already paid in 30 years in April 2016.

‘I am delighted the government has listened to our concerns and extended the deadline for people to top up their state pensions,’ he said today.

“It is particularly welcome that people can continue to top up at current rates and not pay the increased rates for voluntary contributions which will arrive from April.

“For most people with a state pension deficit, the top-up can be excellent value, and this extended timeframe will mean more people can do the proper checks and then top-up with confidence.”

Liberal Democrat work and pensions spokeswoman Wendy Chamberlain, who had called for the deadline to be pushed back to 2025, said: ‘While we are delighted to see that the government has listened to our concerns and given people more long to ask for help, we still have major concerns.

“An extra two months is simply not enough for retirees and future retirees to seek the advice they need.

“It is sheer negligence on the part of ministers to risk hundreds of thousands of pensioners being left without their full state pension through no fault of their own.”

“Ministers must listen to the Liberal Democrats again with an urgent two-year extension to the deadline and a fully equipped Future Pension Center helpline to ensure that all those affected can access the advice they need.”

HMRC said today it had given taxpayers more time to make voluntary National Insurance contributions ‘after members of the public raised concerns about the previous deadline of 5 April 2023’.

He said: ‘Anyone with gaps in their National Insurance record from April 2006 now has more time to decide whether to fill the gaps to increase their new state pension. All payments made will be at the lower rates for the 2022 to 2023 tax year.

“As part of the transitional arrangements to the new state pension, taxpayers were able to make voluntary contributions for any incomplete years on their national insurance record between April 2006 and April 2016, to increase the amount that they receive when they retire.

“And after an increase in customer contact, the government has extended the deadline to ensure people have time to make their contributions.”

How much is the state pension?

The basic state pension is currently £141.85 a week, or around £7,400 a year. It is supplemented by additional state pension rights – S2P and Serps – if they have been accrued during working years.

The two-tier state system was replaced in 2016 by a new ‘flat-rate’ state pension. This is currently worth £185.15 per week or around £9,600 per year.

Both amounts will increase by 10.1% in April – the old state pension at £156.20 and the new at £203.85.

People who have retired from S2P and Serps over the years and who retire after April 2016 receive less than the new full state pension.

Workers had to have 30 years of National Insurance contributions to get the old state pension, but now need 35 years of contributions to get the new flat-rate state pension.

But even if you paid in full for 35 years, if you contracted for a few more years, it could still reduce what you get.

Everyone has the option of deferring their state pension to get more in their later years.

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