How to make sure you don’t get underpaid when it comes to state pension

Helen Morrissey
Updated
state pension. A senior couple planning their finance and paying bills while using a laptop at home. A mature man and woman going through paperwork and working online with a computer
If you have gaps in your national insurance record, you may not be on track to receive the full state pension. (shapecharge via Getty Images)

The state pension often forms the backbone of our retirement income and it’s fair to assume that when the time comes to claim it you will get the right amount. However, this is not always the case and gaps in your national insurance record can cost you dearly.

Under the current system you need 10 years’ worth of national insurance credits to qualify for the new state pension and 35 years’ worth are needed to get the full amount which is currently around £11,500 per year.

However, many people have gaps in their national insurance record — for instance when they’ve spent time out of the workforce caring for loved ones — and this can affect their entitlement.

Read more: How to save for a good retirement income

Getting less than you were expecting can come as a nasty surprise but there are things you can do about it.

This will tell you your state pension age, what you are on track to receive and also highlight if you have any gaps.

If you find gaps that shouldn’t be there then contact the Future Pension Centre.

You may find that gaps in your national insurance record correspond with times when you would have qualified for a benefit that comes with an automatic credit.

Examples include child benefit, universal credit and jobseeker’s allowance. If this is the case, then you may be able to backdate a claim and get these credits added so you can boost your pension.

Another option is to buy national insurance credits to plug the gap. You can usually buy credits going back to the previous six tax years but if you are a man born after 5 April 1951 or a woman born after 5 April 1953 then until April 2025 you have the opportunity to plug gaps going back to 2006.

Read more: What Labour and the Tories are offering pensioners in their manifestos

In most cases, topping up a full year will cost you £824 (partial years cost less), though if you are topping up the current tax year then it's £907. In return you will get an extra 1/35th of your pension which works out at around £328 per year. This works out as great value for money as you will have made your money back within three years of reaching state pension age.

However, it is really important not to just hand over the money without checking that you really will benefit.

If you were contracted out of the second state pension, for instance, you may find that any top ups you make don’t actually improve your state pension. Under this system you were allowed to contract out of the state second pension in exchange for you and your employer paying less national insurance.

However, many people got a top up to their workplace pension so haven’t missed out.

Contracting out has been abolished but it will still be a factor for many people so it’s important to check if you are affected when looking to top up your state pension.

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