Over four million people have topped up their state pension since 2001 – how to check if you can too

Economy
By Liam

More than four million people have increased their AOW benefits since 2001 – and you still have time to increase your AOW benefits before the new July deadline

  • Gaps in your National Insurance record may mean you are entitled to supplements
  • More than a third of those entitled to state pension miss out on the full amount
  • If you supplement your state pension, you can add thousands of euros to pension funds

By Fran Ivens Because this is money

published: | Updated:

Topping up your state pension could boost your retirement income by thousands of pounds, but the British only have until July to meet this year’s deadline.

Since 2001, more than four million people have paid class 3 national insurance contributions, helping to fill old gaps in their NI administration and receive higher state pension benefits.

Figures from the Department of Work and Pensions show that an average of 193,000 people supplemented each year from tax year 2000/01 through tax year 2020/21, said wealth manager Quilter.

The average cost of membership for the four million people who upgraded was £474 over the period.

AOW supplement: It’s worth checking whether you can fill gaps in your state insurance and increase your pension.

In March, the government succumbed to pressure and extended a tight deadline to buy additional state pension supplements after frustrated savers blocked their phone lines for weeks.

People seeking to increase their state pension now have until July 31 to do so at current rates of up to £824 for each year, and less for a gap year.

Normally 2016/17 would be the earliest year for NI records to be filled in 2022/23, but until the end of July people can fill in gaps as far as 2006/07.

Buying state pension supplements can give a big boost to retirement income if you buy or fill in the right years.

As of March 2020, nearly 3.8 million people – about 34 percent of those receiving the state pension – were missing out on the full amount, according to the most up-to-date data from the Ministry of Work and Pensions.

In addition, about 805,000 people will not receive the full new AOW pension, representing 55 percent of the nearly 1.5 million people who receive it.

They may receive less than the full AOW pension due to gaps, but also if they have agreed to pay extra NI contributions during their working life – S2P and Serps.

Jon Greer, head of pension policy at Quilter, said: ‘The government made the right decision to extend the deadline to July.

Still having trouble buying top-ups?

This is Money gets a lot of complaints from readers about the confusing and sometimes chaotic system of the state pension supplements.

A constant problem is the telephone lock that prevents callers from supplementing their state pension.

We reported the issue to DWP and the deadline was later extended.

But if you are still having problems, write and tell us your story at pensionquestions@thisismoney.co.uk

Please put SIGN-OUT PENSIONS in the subject line.

This is Money will not use your information for marketing or other purposes.

Unfortunately we cannot answer everyone. You can also contact your MP for help.

“But that new deadline is fast approaching and again it’s important to appeal to anyone who thinks they have gaps to check and think about filling them in if it benefits them and they can afford it .

Filling these gaps is one of the best investments you can make. To put it in perspective, someone with 10 missing years could pay just over £8,000 to plug the gaps and increase their state pension income by £55,000 over an average retirement of 20 years.’

In general, the new full AOW pension is paid to those who have paid NI contributions for at least 35 years.

You are entitled to the new state pension if you have had national insurance contributions for at least ten years and: a man was born on or after 6 April 1951 or a woman was born on or after 6 April 1953. If you were born before these dates, you will receive receive the basic pension instead.

People between the ages of 45 and 70 who have gaps in their NI record are likely to take advantage of the current concession to buy top-ups from 2006, and should act now to meet the deadline.

Gaps in administration can be for a variety of reasons, such as having a low-income job or being unemployed but not applying for benefits.

Via the the government’s forecasting tool on gov.uk.

If you’re not forecast to get the full amount of the new state pension (currently £203.85 per week), it’s worth searching your record for gaps.

However, it can be tricky to figure out which years, if any, you can benefit from, so the government and money experts recommend checking with the Future Pension Center before handing over your money.

Greer adds: ‘Paying voluntary contributions will not benefit everyone and it is important to contact the Future Pension Center on 0800 7310175 who can tell you if paying extra will increase your entitlement to a state pension.

“It could be one of the most fruitful phone calls you make.”

How much is the state pension now?

The basic pension is £156.20 per week or approximately £8,120 per annum. It is supplemented with additional AOW entitlements – S2P and Serps – if these have been accrued in working years.

This two-tier state system has been replaced since 2016 by a new ‘flat-rate’ state pension for people retiring. This is worth £203.85 per week or £10,600 per year.

People who have been outsourced to S2P and Serps over the years and retire after April 2016 will receive less than the full new state pension.

Employees had to have 30 years of National Insurance contributions to get the old state pension, but they now have to have paid 35 years of contributions to get the new flat-rate state pension.

But even if you’ve paid in full for 35 years, it could still be less if you outsource the contract for several years.

Everyone will have the option of deferring their state pension in order to receive more later. You can check your NI record here.

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