If you’re looking to get the full value from your income in retirement, a good place to start is with your State Pension.
The amount of State Pension you get is based on your record of National Insurance Contributions (NICs). If you haven’t made enough contributions then you won’t get a full State Pension. But you may be able to pay voluntary contributions to boost the amount you get, even if you’ve already retired.
Provided you are eligible to top up, the cost of doing this is effectively subsidised by the Government which means it can prove good value for money.
Here is how it works.
Every gap year in your National Insurance contributions is worth 1/35th of your entire state pension entitlement.
From the tax year 2019/2020, those with full state pension entitlement receive around £168.60 per week. This means that each additional year you plug a gap will be worth around £4.80 per week for life (168.60/35= 4.80).
This is equivalent to £250 per year (52x £4.80). So, if you pay one extra year of NICs you’ll earn back what you paid in three years.
If for some reason, you think you won’t be getting the full amount, then it’s worth considering topping up.
The rules about who can top up, how much it costs and what impact it will have on your State Pension are rather complex. For example, in some cases, you can use your spouse or ex-spouse contributions to compliment your own or those who had already built up a pension under the ‘old’ rules worth more than the full flat-rate amount will receive that higher amount when they retire.
Here at Elva, we can help you to navigate these various rules and regulations and make a more informed choice about whether or not to toping up will be beneficial in your individual circumstances.
You can also access the Government’s free guidance services by following this link.