The number of years of National Insurance contributions needed to receive the full Basic State Pension has been reduced this year from 39 to 30, increasing the number of people entitled to the full Basic State Pension of £97.65 per week.
However, for those who may not have the 30 complete years of NI contributions to the state pension needed, the government is offering the chance to ’buy back time’ by paying up or completing additional years of NI contributions. You do not have to be working to avail of this deal – those already in retirement can also participate.
This offers workers with a broken work pattern a golden opportunity to ‘patch the holes’ in their National Insurance contributions record and maximise their income from their pension.
These late payments to the government pension are known as Class 3 Contributions, and will increase your Basic State Pension entitlements as part of your general pension planning.
People who have had broken working patterns may have missed out on some years of NI contributions in the past, and would particularly benefit from making the Class 3 Contributions needed to boost their government pensions. Others who would benefit include those who were unemployed but did not claim benefits, those who earned less than the lower earnings limit for NI contributions, i.e. £97 per week, or those who lived abroad.
What is the cost of topping up the Basic State Pension?
Buying back years of NI contributions costs £626.60 per year, or £12.05 for each week if you are completing a year.
A special deal applies to those buying back a year from the previous two years i.e. someone in 2010 buying back government pension contributions for 2009 or 2008. These apply, not at today’s rate, but at the rate that applied in that year. Because the rates were increased in 2009, you can still buy for 2008/09 at a lower rate of £8.10 per week.
Payments to buy back lost NI years must be made within 6 years, so that in 2010 contributions can be made for years back to 2004/05. A special exemption also applies to those with 20 years of NI contributions, who will reach the state retirement age, i.e. the age at which they can draw the Basic State Pension, between April 6 2008 and April 5 2015 – this group can buy an additional 6 years of NI contributions for any years back to 1975/76.
