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Top up your state pension and get £244 more a year in retirement

Joanna Faith
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Joanna Faith

Hundreds of thousands of people who have stopped work before the state pension age are being urged to check whether they can top up their state pension at “heavily subsidised rates”.

Mutual insurer Royal London says early retirees should check their National Insurance (NI) record for 2017/18 to see whether they have a qualifying year towards their state pension and if not, consider topping up their NI record.

A year of voluntary Class 3 NI contributions costs a lump sum of £741 for 2017/18 and can add £244 per year through retirement. Royal London says someone who draws a state pension for just four years is likely to get back more than they put in.

Under new rules introduced in April 2016, you need 35 years of NI contributions to qualify for the full state pension. Now that the financial year 2017/18 is complete, you can top up your NI record for that year if you don’t have a qualifying year towards your state pension.

You can check whether 2017/18 is a qualifying year by going on the government website ‘check your state pension’.

Royal London has produced a guide on this topic, which has been downloaded 70,000 times.

Former pensions minister, Steve Webb, who is now director of policy at Royal London, said: “Many hundreds of thousands of people who are not going to get a full state pension of £164.35 could boost their pension prospects by paying heavily-subsidised voluntary NI Contributions.

“Now that 2017/18 is over, it is time for those who did not build up a qualifying year towards their pension to review whether to pay voluntary contributions for that year.  This will be particularly relevant to people who in the past were in pension schemes which were contracted out of part of the state pension system and who will not otherwise get a full state pension as a result.

“I hope that our new guide will steer people through the complexities of whether and how to do this.”

Royal London says 2017/18 will already be a qualifying year for you if you:

  • Were working through the year and paying NICS on earnings of £157 per week or more;
  • Were working through the year and earning more than the Lower Earnings Limit of £113 per week and being credited with NI contributions;
  • Were receiving NI credits because of receipt of a qualifying benefit including carers allowance or child benefit for a child under 12;
  • Had successfully applied for NI credits for particular groups such as certain grandparents, certain carers etc.
  • Were a man close to pension age who receives ‘automatic credits’ for being above women’s state pension age for the whole year.