The state pension and your National Insurance record

Sponsored feature by Siobhan Cordery, chartered financial planner

The new state pension, for those who reach state pension age after April 6, 2016, is based on your National Insurance (NI) record: you will need 35 qualifying years of paying NI to receive the full state pension.

If you have more than 10 years, but less than 35 years NI contributions you will still receive a state pension, but the amount you receive may be reduced.

Improving your NI record and paying voluntary contributions can be a financially attractive way to boost your income in retirement. In many cases, buying a single year of contributions at a cost of £600-£700 could boost your state pension entitlement by more than £200 a year for the rest of your life. That is more than £4,000 over a course of a 20-year retirement*.

You can usually only pay for gaps in your record from the past six years, however, you can sometimes pay for gaps from more than six years ago depending on your age. Filling these to receive a higher state pension in return is set to become more expensive from April 6, 2019.

For example, you could save £500 if you fill six years between 2010-11 and 2015-16, subject to your eligibility. (Different rates apply before April 6, 2019: the weekly rate varies between £12.05 for 2010-11 to £14.10 for 2015-16, in this example).

The normal rate for class 3 voluntary contributions of National Insurance will be £15 per week from the April 6, 2019.

Your state pension is a valuable part of your overall retirement income so it is important to maximise it where possible, and it is affordable. It is also important to check your NI record and speak with a qualified adviser before doing so, as the voluntary contributions won’t always increase your state pension.

*Subject to your NI record and eligibility.