Boost your state pension

The new state pension system, introduced in 2016, is a simpler beast than its predecessor. The rules from 2016 are a straightforward 35 years of qualifying national insurance (NI) contributions will entitle you to the full state pension. However, there are some discrepancies, and some opportunities, in getting from the old rules to the new.

Consider for example, the millions of people that were at one time ‘Contracted Out’ of the state pension. This meant that both you and your employer would pay a lower rate of NI, with the idea being that whilst you would have a reduced state pension, you would use the NI savings to boost your private or workplace provision.

What that means though, is that there are people who have 35 qualifying years who will not get the full rate of the State Pension, owing to previous contracted out periods. My mother for one.

Now, if you are below the State Pension age and continuing to work you will continue to build up years. However, if you have stopped work you will not, and thus your state pension may be less than your peers.

The above also relates to people who took a career break to raise children – do you have your 35 qualifying years?

One way to boost your State Pension at a relatively small outlay is voluntary NI contributions, also known as Class 3 contributions. For the 18/19 tax year, the cost of Class 3 contributions was £14.65, or £761.80 per year. It rises in 19/20 to £15 per week. The good news is that this would result in an uplift of your State Pension, to the tune of around £230 per annum, and therefore profit after 4 years of State Pension payment.

The starting point is to evaluate how much your State Pension is forecast to be, which can be done via the Government Gateway website.