Act now to boost your state pension by £55,000

Time is running out to claim an ‘extra special’ offer to boost your state pension.

Thousands of people could be missing out on the opportunity to boost their state pension by £2,750 a year, unless they act now and buy voluntary National Insurance contributions.

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Normally, it’s only possible to buy backdated contributions for six years (so back to 2016-17), but a ‘special offer’ is giving eligible candidates the opportunity to go back a further 10 years (to 2006-07), so long as they do so before the 5 April 2023 tax year-end deadline.

This deal is only available for people who will claim the new state pension and reach state pension age on or after 6 April 2016.

Here a link to the full details on the government website.

To qualify for the full new state pension, men and women each need 35 years’ of National Insurance contributions, or NICs. This is currently £185.15 a week, but will rise to £203.85 a week in April this year after the triple lock guarantee granted pensioners a bumper 10.1% increase.

If you have between 10 and 35 years, you get a partial rate, but if you have less than 10 years, you don’t qualify for any state pension at all.

It is also important to know that anyone who contracted out of the Additional State Pension (also known as State Second Pension or 'SERPs') may need more than 35 years for a full entitlement.

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Buying voluntary National Insurance contributions can help you plug any gaps you might have in your NI record and increase the state pension you eventually receive.

For some people this can be a savvy investment.

At the moment, voluntary class 3 NI contributions cost £15.85 a week or £824.20 for the year. With each lump sum adding up to 1/35 of the full state pension, one year’s worth of voluntary NI contributions boosts your payments by £5.29 a week or approximately £275 over the year.

This means that it will only take you four years to recoup their initial outlay – all gains thereafter are profit.

According to consultancy firm LCP, somebody purchasing 10 years of National Insurance contributions at a cost of £8,242 (10 x £824.20), could boost their state pension by £2,750 a year, which works out at a total of £55,000 over a 20-year retirement.

State pension payments are guaranteed and that means the only real risk you need to consider is dying before you’ve had the opportunity to recoup the purchase price. The returns also far outstrip the income that could be potentially be achieved by investing the purchase amount for income, or purchasing guaranteed income with an annuity.

LCP partner Steve Webb said: “For people with gaps in their NI record going back more than six years, the window to fill those gaps will soon close. Some people have gaping holes in their NI record and this will be the last chance to fill them.”

Although buying voluntary National Insurance contributions to plug gaps in your NI record is the right thing to do for many people, it always makes sense to contact the Future Pension Centre at the Department for Work and Pensions (DWP) first. This is because there are some people it may not work for, for example people who contracted out of the state pension for an extended period of time.

It may also make less sense buying voluntary National Insurance contributions if you have serious health problems and are not confident you would live long enough to recoup your investment.

Other ways to plug your National Insurance gap

Before buying voluntary National Insurance contributions, it’s also important to be aware that there could be some other ways to plug gaps in your National Insurance record.

A little-known concession, launched in 2013, enables working parents to give up National Insurance credits they get from claiming child benefit and transfer them to grandparents who are taking care of grandchildren under the age of 12.

This can help working-age grandparents plug gaps in their National Insurance record and boost their entitlement to the state pension.

The children’s parents don’t lose out either – if they’re working they’ll be paying National Insurance and won’t need the NI credits they get from claiming child benefit.

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Grandparents who think they may be eligible need to apply for a transfer from HMRC.

There could also be periods in your life where you weren’t able to pay National Insurance yourself, but may have been eligible for credits.

This can include periods of illness or unemployment and taking time out of work to care for somebody. You can get the lowdown on who is eligible for National Insurance credits here. In some cases, you should have got credits automatically, but in others you may need to apply for them yourself.

Find out where you stand

If you aren’t sure whether you will be entitled to the full state pension – or even if you are – it’s a good idea to apply for a state pension forecast.

This will tell you how much state pension you are scheduled to get based on your National Insurance contributions, when you will be able to start claiming and how you can potentially increase it.