- People often don’t understand whether to buy refills.
- One year of voluntary national insurance contributions usually costs £824.20.
- Those who replenish the account for one year usually return their money after four years.
Buying state pension supplements can significantly increase your retirement income, but people often don’t see if it’s personally beneficial for them.
You will need to check your National Insurance record to see how much you have already paid into your public pension and then decide if you need to top up and if so, in what years to either fill in the gaps or buy from scratch.
Now the usual six-year deadline for this is being extended to 2006/07 – the special deal was supposed to expire on April 5, but after the phone broke down, the deadline for buying a state pension was pushed back to 31 years. July.
State Pension Supplements: Learn How to Increase Your Retirement Income
Former Minister of Pensions and columnist for This is Money Steve Webb launches a free website dedicated to buying government pensions. help depositors in the process of taxation.
Webb, who is now an LCP partner, says the site is designed to help people “decipher” the information they get about their Social Security history from the government’s website and see if topping up their state pension makes sense.
How much does it cost to increase the state pension?
One 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, a state pension supplement can be a very cost-effective way to secure a higher income in retirement,” says Steve Webb.
“In many cases, this will increase the right to a state pension by 1/35 of the standard rate, or about £275 a year.
“This means that someone who tops up for one year will get their money back within four years of receiving a pension, even with the base tax rate.”
Webb says someone who receives a state pension for 20 years will get back £4,400 (less basic tax) at an initial cost of £824.20 at today’s rates.
What do you need to know before buying a refill?
Steve Webb believes that Government website “Check Your State Pension” provides useful information but, crucially, does not help people decide which years they should top up.
The LCP website helps fill the gap for those who fall under the “new” state pension system launched in April 2106, i.e. men born on or after April 6, 1951, and women born on or after April 6, 1953.
It works like this:
– Users are encouraged to obtain information about their personal national insurance record from Gov.uk website first
– They are asked for basic information about their age and what the record says – this is not kept by the LCP.
– The site then interprets this information to explain to users their options.
– Users are warned that they should always check with the Department of Work and Pensions that the supplement for the years indicated will definitely increase their state pension before paying any money.
Webb says that in some cases the LCP site is simply confirming what users have already done, but he hopes it will help others discover the potential for top-ups.
He adds that there are two groups for which account replenishment may be of particular interest. First, there are government employees who retired early and were members of an occupational pension scheme that reduced their government pension below the ceiling.
And second, self-employed people who may have gaps in their NI report and can go back to any year since 2006/07 to fill it up.
Are you struggling to buy refills?
It’s Money receives a lot of complaints from readers about the confusing and sometimes chaotic system of state pension supplements.
A recurring problem is that the information line is maintained by the DWP, but additional payments must be made by the HMRC, which also holds the NI records.
We’ve covered numerous cases in the past of contributors who innocently bought useless top-ups and were initially denied refunds before HMRC stepped back and started issuing them in the normal way.
And we have seen cases where contributors have paid thousands of pounds to top up their state pension and have seen their money disappear without explanation for months, until It’s Money stepped in.
Meanwhile, some people have been waiting for months for confirmation from the Department of Labor and Pensions on which years to buy, how much and how to pay.
Write and tell us your story at [email protected] Please specify STATE PENSION SUPPLEMENTS in the subject of the email.
This is Money will not use your information for any marketing or other purposes.
Unfortunately, we won’t be able to answer everyone. You can also ask your MP for help.
Steve Webb’s Golden Rules for Buying State Pension Supplements
1. Make sure you get all the loans you qualify for before you pay voluntary NI for a particular year.
For example, grandparents younger than retirement age can get credit for their state pension if they care for a grandchild, allowing the child’s parent to go to work.
Since NI credits cost nothing, you should always request what is available for free before paying voluntary NI for any given year.
2. Whether it makes sense to replenish the account of an individual depends on his individual circumstances.
You should always start by checking your state pension book on the government web page.
This can tell you, for example, that you are already going to receive the maximum state pension and therefore do not have to make any voluntary contributions, even if there are gaps in your track record.
Completing the forms for certain years, especially before 2016/17, may sometimes not affect your state pension, especially if you were contracted and paid for 30 years by April 2016.
3. Some years may be cheaper to complete than others. If, for example, you have been working part of the year, you may find that…
Credit: www.thisismoney.co.uk /