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How do I top up my state pension? Steve Webb's golden rules

State pension supplements: find out how to boost YOUR retirement income

Want to top up your state pension, but don’t know which years to buy? How to Boost YOUR Retirement Income… Plus Steve Webb’s Six Golden Rules

  • People often don’t know if buying refills is worth it
  • A year of voluntary National Insurance contributions usually costs £824.20
  • Someone who tops up for a year usually gets their money back in four years

Buying state pension supplements can give a huge boost to retirement income, but people are often confused as to whether it will be worth it to them personally.

You’ll need to check your National Insurance record to find out what you’ve already paid for a state pension, then decide if you need to top up and, if so, the years to fill in the gaps or buy from scratch.

At present, the usual six-year deadline for doing this is being pushed back to 2006/07 – a special deal that was due to expire on April 5, but after a phone blackout the deadline to buy pension top-ups from the ‘State has been pushed back to July 31.

State pension supplements: find out how to boost YOUR retirement income

State pension supplements: find out how to boost YOUR retirement income

Former pensions minister and This is Money columnist Steve Webb runs a free website on buying state pension supplements to help savers through the tax process.

Webb, now an LCP partner, says the site aims to help people ‘decode’ the information they get on their National Insurance record on the government site and figure out if it makes sense to top up their pension public.

How much does it cost to increase your retirement pension?

A year of voluntary National Insurance contributions costs £824.20 at the current ‘class 3’ rate, or less if you complete a partial year.

“At best, supplementing your public pension can be a very cost-effective way to secure a higher income in retirement,” says Steve Webb.

“In many cases this will increase state pension entitlement by 1/35th of the standard rate, or around £275 a year.

“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 is on state pension for 20 years will recoup £4,400 (net of basic tax) for an initial outlay of £824.20 at today’s rates.

Steve Webb thinks the government’s ‘Check Your State Pension’ website provides useful information, but mostly doesn’t help people decide which years, if any, they should complete.

The LCP website helps bridge the gap for those under the “new” state pension system launched in April 2106 – so men born on or after April 6, 1951 and women born April 6, 1953 or after.

It works as follows:

– Users are urged to first obtain their National Insurance Personal Record information from the website

– They are asked for basic details of their age and what they say about this record – this is not kept by LCP

– The site then interprets this information to explain to users their options

– Users are warned that they should always check with the Department for Work and Pensions that the top up of the identified years will certainly increase their state pension before paying out any money.

Having trouble buying refills?

This is Money receives many complaints from readers about the confusing and sometimes chaotic system of state pension supplements.

A constant bug is that the infoline is handled by the DWP, but further payments must be made to HMRC, who also hold the NI records.

In the past we have covered many cases of savers who innocently bought worthless top ups and were initially refused refunds before HMRC backed off and started issuing them regularly.

And we have reported cases of savers who paid thousands of pounds for state pension top-ups and watched their money disappear without explanation for months, until This is Money stepped in.

Meanwhile, some people have waited months for confirmation from the Department for Work and Pensions of which years to buy, how much and how to pay.

Write and tell us your story at put STATE PENSION SUPPLEMENTS in the subject line.

This is Money will not use your information for marketing or other purposes.

Unfortunately we will not be able to respond to everyone. You can also contact your MP for assistance.

Webb says that in some cases the LCP site will simply confirm what users have already concluded, but he hopes it will help others discover the potential of top-ups.

He adds that there are two groups for which supplements may be of particular interest. First, civil servants who took early retirement and were members of a contracted occupational pension scheme that reduced their state pension below the maximum amount.

And second, self-employed people who might have gaps in their NI record and can go back to any year since 2006/07 to complete it.

Steve Webb’s golden rules for buying state pension supplements

1. Make sure you get all the credits you are entitled to before paying the voluntary NI for a given year.

For example, grandparents under retirement age can get credits towards their public pension if they are caring for a grandchild, allowing the child’s parent to to go to work.

As NI credits cost nothing, you should always claim what is available for free before paying the voluntary NI for a given year.

2. Whether or not it makes sense for any given individual to top up depends on their personal circumstances.

You should always start by checking your state pension record on the government webpage.

This may tell you, for example, that you will already be receiving the maximum state pension and therefore do not need to make voluntary contributions, even if you have gaps in your file.

Filling in blanks for certain years – especially those before 2016/17 – may sometimes have no impact on your state pension, particularly if you were under contract and already paid in 30 years in April 2016

3. Some years may be cheaper to complete than others. If, for example, you worked for part of a year, you may find that you can complete that year more cheaply than filling in a completely blank year.

4. Fill in the gaps at class 2 rate if you can, as voluntary NI for the self-employed is much cheaper than for employees – currently £163.80 a year, rather than class 3 contributions at 824, £20 per year.

If you had low-income self-employment in a given year and your file was empty, you should be able to pay at the Class 2 rate for that year, saving you money.

5. People who expect to receive benefits in retirement may find that their increased public pension is clawed back in the form of a reduced pension credit or housing allowance

6. Always check before handing over money. The rules are complex and you can sometimes fill a gap that does not change your final pension.

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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