Archive: MoneySavingExpert's Money Tips Email

Important. Are you under age 73?

Martin: 'You may be able to pay £800, or far less, to gain £5,400 or more, but the clock's ticking! It's all about extra National Insurance (NI) years'

And... finally, many can now do it online

While 'boosting your state pension' doesn't sound sexy, it's the MOST LUCRATIVE THING many can do with their money. To whet your appetite, let's start with one of huge numbers of successes we've had both after I covered it on TV (see my 5-min video explainer) and in our full state pension boosting guide.

It's from Martin Clark who kindly tweeted me last year: "@MartinSLewis You are a star, sir. I asked about my voluntary National Insurance contributions and I was 4 years short. If I pay £2,536 (1 year is £63.40), I get an extra £20.83 a week. Over 20 years I'll get an extra £21,000. Thank you." (I edited out the bit where he said I should be Chancellor - heaven forbid!)

This is all about the 'new' state pension introduced in 2016, which applies to all men born after 5 April 1951 and women after 5 April 1953.

To get the FULL state pension, you need 35ish - and it really is an 'ish', it can vary widely - qualifying National Insurance (NI) years. These usually come from working, looking after children, or via some benefits. Yet many are missing past NI years, commonly due to years abroad, low incomes, career breaks or not claiming credits.

This is a big, occasionally complicated transaction. So I want to take you through it step-by-step. Please don't skip any. That could cost you.

Step 1) Two important checks EVERYONE should make. They're simple and only take a couple of minutes. The links take you through to easy help.

1. Are you missing any National Insurance years since 2006?Speedily check your past NI record. It only counts towards your state pension if it says 'full year' - even missing a week of credits can mean you get nothing for that year.
   
   
   Important: If you have years missing before 2006, you CAN'T buy them back (though in a few cases if you didn't claim earlier years you should have, you may be able to get them free - see step 2).
   
   

   You may be able to buy part years super-cheap... National Insurance years are binary; there's no credit for a part year. So if you've not worked for a full year and/or you didn't earn over the threshold needed for that year (eg, it's £6,396 for this year), you won't get the year. But in some cases you only need to buy a week's worth, so £16 of credit, to get you over the threshold for a full year.

   
   
2. Are you on track to get the full state pension? Next step is to check your state pension forecast. A full state pension would see you forecast to get £221.20 a week.
   
   

Step 2) Check if you can plug NI gaps for free - it could save you £1,000s. While NI years are usually added to your record automatically, in some cases they need claiming. If you didn't do that, likely as you weren't aware, you can back-claim. We've a full list of free NI years to claim, but here are what I suspect are the three biggest...

• Child Benefit not claimed or claimed by wrong partner. Those providing childcare and not working, or earning under £123/wk, may be due NI credits. It's usually triggered by claiming Child Benefit. Yet many miss out as either i) their higher earning partner claimed it instead or ii) they didn't claim as their partner earned over the threshold. Ring a bell? See Child Benefit NI claiming.
  
  As Sean emailed: "I applied to transfer my wife's NI to me as she was claiming Child Benefit and working while I was a stay-at-home parent for 10 years. I got all the details I needed from your website, and the saving to me topping up was around £5,500 - I'm now entitled to a full state pension. What a relief!"
  
  
• Grandparents (or other family members) providing childcare. If a family member looked after an under-12 any time since 2011, before they were state pension age (even if they are now) as parents/guardians were working, then the parent can apply to transfer their childcare credit to the family member. See specified adult childcare credit - it can sometimes be backdated to 2011. 
  
  As Debra emailed me: "I was around 6 NI years short. I was advised I'd need to pay £4,000+ to make it up. I recalled an item in your programme about grandparents' credits, completed the forms and have just found it's made up the shortfall for free."
  
  
• Carer's Credit. A free NI 'credit' for those 16 to state pension age who provide unpaid care, such as washing, cooking, shopping or dressing, for at least 20hrs a week for someone receiving at least one qualifying benefit (including Personal Independence Payment, Disability Living Allowance etc). See how to claim Carer's Credit.

Step 3) Missing years from 2006 to 2018? Decide soon if it's 'likely' worth buying years. It oft depends on your age...

• At/near state pension age (66)? It's relatively easy to see if topping up may help. If your state pension is, or is forecast to be, under £221.20 a week, and you can't plug gaps for free, topping up by buying extra years could be a no-brainer (see below for how to check). If so, and you're already taking your pension, do it ASAP, as the sooner you do it, the sooner your pension will be enhanced.
  
  
• Aged 45 to 60ish? Less definite as you may still naturally fill the gaps. The younger you are, the more time you have to earn enough qualifying years before you reach state pension age (remember it's 35ish years needed, but it can vary with circumstances). Here are the key things to think about...
  
  - The older you are, the less time to fill the gaps naturally.
  - Have you got years missing after 2019? (If so, and they'd be enough to plug gaps, you could delay the decision.)
  - The more years missing, the more likely buying years would help.
  - If you can buy partial years cheaply, it's a better bet (eg, if it only costs £16 to buy, it's likely worth doing as a 'just in case').
  
  
• Under 45? It's not usually worth it, barring for cheap partial years. Generally, if you're planning to stay in the UK and work for much of the rest of your life, you've time to fill the gaps, so it's not worth it.
  
  The one exception is if you can buy a very cheap partial year, eg, where you just missed a couple of weeks' contribution, so it only costs £16 to £50 to buy the full year. In which case, it can be seen as an insurance against you not earning years, and at that price is likely worth it, even if it later turns out futile as you'd collect enough years to get the full pension anyway.

Step 4) The most you'll pay for the old years is £824. This can typically net you an 'inflation-proofed' £5,000+. The exact cost of topping up a full voluntary NI year varies slightly depending on which year it is. For employees, class 3 contributions cost...

- 2006/07 to 2019/20: £824.20 for a full year (or £15.85 a week)
- 2020/21: £795.60 for a full year (or £15.30 a week)
- 2021/22: £800.80 for a full year (or £15.40 a week)
- 2022/23: £824.20 for a full year (or £15.85 a week)

If you're self-employed, you can buy class 2 contributions a lot cheaper, for around just £160/yr.

Each extra year typically adds £329 annually to your state pension

This means, even if you had to pay for the whole year, you'd get back what you put in after about two and a half years of state pension. And every year you get your pension after that is profit. We've built a simple State pension NI contribution top-up calculator to help with the maths, though this graph gives you an idea.

A man living for the typical life expectancy would get a total £5,400 back, a woman £6,100 as life expectancy is longer. There are things that can lower the return though, including...

- If you die sooner, thus don't collect your pension for as long.
- If the extra pension income (which is taxable) takes you up a tax threshold, so you pay a higher rate of tax on the amount earned above that threshold (see income tax rates). It's still worth doing though.
- If you were only a couple of hundred quid a year below the state pension, you obviously wouldn't get the full gain from buying a year (you'll find this out in step 5).

Pensions are, mostly, inflation-proofed too

The state pension has long had a 'triple lock', meaning it must go up by the highest of a) 2.5% b) Consumer Prices Index inflation or c) average earnings. This may change, but most likely if it did, it'd still be inflation-proofed. 

Step 5) Think buying NI years is right for you? Before you pay out... some important safety checks.

Even if you've passed all the checks, you need actual calculations, or you may pay for years that won't help, or are unnecessary. Until now, that means getting advice via a bespoke (often clogged) phone line. Now some people can finally do this online, which should take some pressure off the phones, though if in any doubt, I'd still do it by phone. 

a) Who CAN'T do this online... You won't be able to if:
- You're at state pension age or within 4mths 8 days of it.
- You're filling gaps from self-employment or when you worked abroad.
- You hold a 'Married Women's Reduced Rate Election' certificate.
- You're eligible for 'Home Responsibilities Protection'.

b) If you can and want to do it online... Under the new Check your state pension forecast tool, you'll be shown your state pension forecast, NI record, payable gaps, and if you can pay for gaps online. It'll then either decide you've a complex case and you must do it by phone (see below) or let you select the year(s) to pay for, in full, online via bank transfer or via Open Banking. You can't pay in instalments.

PS: HM Revenue & Customs (HMRC) hasn't been great at giving us info on this, nor would allow us screengrabs to help. So we could do with your feedback on how the new online tool works for you.

c) How to do it via phone and get 1-on-1 help. Which number you call depends on your age...

- Under state pension age? Call the Future Pension Centre.
- At or above state pension age? Call the Pension Service.

While many have told me it can be a pain in the bum to get to speak to someone on these lines, once they do, most say it's brilliantly helpful. Such as Tom: "A huge THANK YOU about the NI advice and phoning the pensions people. I was missing 9yrs. I phoned to be told all I needed to buy was 7yrs to qualify me for an extra £40/wk [so £2,000/yr]. If I hadn't phoned, I'd probably have paid the full £7,500 and lost about £1,800. I'm now looking forward to receiving the full pension."

d) What they won't tell you online or on the phone. The advice doesn't cover every situation. The issues are mostly ones I've already mentioned, but to be sure:

- They won't usually tell you if you're entitled to free years.
- They won't tell you if it will push you into a higher tax bracket.
- They won't tell you that if you're on a very low income, and would have got Pension Credit, this may reduce that.