Savvy entrepreneur takes steps to secure full state pension
Jemma Harrison, a 42-year-old entrepreneur from Cornwall, is taking proactive measures to ensure she receives the full state pension when she retires. With concerns about the gaps in her National Insurance (NI) record, Jemma is exploring options to fill those gaps and maximize her pension.
Qualifying for the full state pension
To receive the full state pension, individuals need 35 qualifying years of NI contributions. Currently, this amounts to £203.85 per week or £10,608 per year. Jemma, who has been freelance for many years and worked overseas, was uncertain about her entitlement.
Filling in the gaps
Fortunately, those with gaps in their NI record can choose to top up their contributions. Through voluntary Class 3 NI contributions, individuals can fill in the years during which they did not pay enough NI. The cost for one week's worth of Class 3 NI is £15.85, while one year's worth is £824.20.
Government scheme extended
The government scheme that allows individuals to fill in gaps in their NI record has been extended until April 5, 2025. This presents an opportunity for individuals like Jemma to secure a higher state pension by paying small amounts now.
Calculating the cost
Jemma contacted HM Revenue and Customs (HMRC) to assess her NI record and determine the cost of filling the gaps. After reviewing her record, she needed to pay a total of £781.20 to fill in five years of missing contributions. Some years only required topping up a few weeks' worth of NI.
A no-brainer investment
By making these voluntary contributions, Jemma is on track to receive the full state pension. Paying just under £800 now will result in an annual boost of around £3,000 in retirement, totaling an extra £60,000 over a 20-year retirement. Jemma encourages others to follow suit and take advantage of this opportunity.
Checking eligibility and making contributions
Individuals can check their eligibility to buy back years and explore options for making voluntary contributions on the Gov.UK website. It's essential to also consider if claiming free NICs credit is possible. However, it's important to note that voluntary contributions may not always increase the state pension, so double-check before proceeding.
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