How to Check Whether You’ve Paid Sufficient NI for Pension Qualifications
As you approach State Pension age, it’s important to verify that you’ve paid enough National Insurance (NI) contributions over your working life to qualify for the full pension.
With the full basic State Pension currently standing at £203.85 per week (as of 5th April 2016), having gaps or missing years in your NI record could mean getting a reduced pension payment. Ultimately, this is something you want to avoid as much as possible. It would feel unjustified to have spent your life working incredibly hard for less pension remuneration than you are rightfully entitled to.
This short guide explains how to check your NI record and understand if you have gaps that could affect your State Pension entitlement. Following these steps and validating all your relevant documents can help you take action to fill any gaps through voluntary contributions and ensure any anomalies are rectified.
Obtaining Your National Insurance Statement
The first step is to obtain your National Insurance statement from the UK government. This details every tax year when you paid National Insurance contributions along with any relevant credits you may have received.
You can easily access this through your online personal tax account via the GOV.UK website. Alternatively, you can fill out a CA5403 form and submit it – by post – to receive your NI record by return mail. Be advised that this has a longer turnaround time than finding your NI statement online.
When you have your statement in hand, there are a few essential steps that outline what to look for, including whether you have adequate NI history for a full pension.
Understanding the NI Contribution Conditions
To receive any State Pension payments under the new system, you will usually require at least 10 qualifying years on your NI record. These are tax years when you worked and made sufficient minimum contributions.
To get the full new State Pension, you will need 35 qualifying years. If you have between 10 and 35 years you can obtain part of the new State Pension.
The exact starting amount (i.e. the higher of either the amount you’d receive under old State Pension rules or the amount you’d get if the new State Pension had been in place when you started work) you receive is calculated by dividing £203.85 by 35 and then multiplying that number by the amount of qualifying years after April 2016.
If you have over 10 qualifying years but gaps in your record, your pension may be reduced depending on how many years you missed.
Check for NI Credits
In addition to the years when you directly paid National Insurance, your record may also show tax years with NI credits. These are non-contributory years that still count towards your State Pension entitlement.
Common circumstances where you can accrue NI credits include:
- Being in a period of long-term sickness or unemployment
- Claiming child benefit
- Receiving jobseeker’s allowance
- Being enrolled in full-time education
- Providing care for over 20 hours per week
So even if you have gaps with no paid NI contributions, accrued credits may still help you achieve adequate pension qualification.
Identify and Fill Any Gaps
Once you have inspected your NI statement and totalled up your qualifying years, you may find you are short on contributions.
For example, if you only have 8 qualifying years but are nearing State Pension age, those 2 missing years could mean getting less in weekly pension payments.
If you discover gaps like this, you have options to fill them through voluntary NI contributions before retiring. Doing so ensures you get the highest pension amount possible based on your individual circumstances.
The amounts needed to fill gaps through voluntary payments change each tax year, so it’s wise to pay close attention to the contribution amounts. However, the most practical advice you can get is from us as trusted tax advisors, who can talk through your options and help you take steps to fill gaps cost-effectively.
Get Your NI Record Reviewed
Checking your own NI record and pension qualification can be complex. If you are approaching retirement age and need support assessing your State Pension entitlement, the financial planning experts at Hamlyns are here to help.
We can review your NI statement, identify any issues that may affect your pension, and advise on how to address gaps. Our advisors will be happy to help you with individually tailored advice and practical solutions that take the stress out of tax planning. We’ll provide the insight you need to verify your State Pension position and retire with confidence.
To book a consultation, please contact us today.