While the State Pension may not be your main source of income in retirement, it’s often an important one. If you’re not on track to receive the full amount, there might be things you could do to boost it.
For 2023/24, the full new State Pension is £203.85 a week, adding up to around £10,600 a year. However, your National Insurance (NI) record will affect the amount you receive.
To claim the full new State Pension, you’ll usually need 35 qualifying years on your NI record. If you have between 10 and 35 years, you’ll normally receive a proportion of the State Pension.
There are many reasons why you may have gaps in your NI record, such as taking time away from work to raise children. If you don’t have the 35 years needed to claim the full amount, reviewing how to boost your State Pension entitlement could be worthwhile.
You can use the government’s State Pension forecast tool to see how much you could receive.
The State Pension may be valuable in retirement for two key reasons.
- It provides a guaranteed income. In retirement, your other sources of income may not be reliable, so having a guaranteed base income that will cover essentials could improve your financial resilience. Knowing that you’ll receive the State Pension every four weeks could provide peace of mind.
- It increases each tax year. Under the triple lock, the State Pension rises each tax year by at least 2.5%. This can help preserve your spending power throughout retirement, as the cost of goods and services may rise. In 2023/24, pensioners benefited from a record 10.1% increase in the State Pension due to high inflation.
To increase your State Pension, you often need to add more qualifying years to your NI record. Here are two options that could boost your retirement income by thousands of pounds.
1. Claim NI credits if you’re caring for grandchildren
Working parents struggling to balance childcare costs and careers often turn to grandparents or other family members for support. But did you know if you’re under the State Pension Age and provide care for a child under the age of 12 regularly, you could apply for NI credits?
According to Royal London, almost 6 in 10 over-50s aren’t aware NI credits can be claimed as a carer or grandparent.
In fact, it’s estimated that grandmothers could be missing out on more than £6,300 worth of State Pension payments for every year of NI contributions they don’t claim.
There’s no minimum number of hours you need to look after the child.
However, the child’s parent must register for Child Benefit, even if they earn too much to receive it. Child Benefit entitles the parent to an NI credit if they aren’t working or earn a low income. If they aren’t claiming the NI credit, they can transfer it to those providing childcare, such as grandparents.
If you’ve cared for a child under 12 in the past, you may be able to backdate your claim to 2011 and boost your State Pension.
2. Purchase additional qualifying years
The government has extended the deadline for a scheme that allows you to fill in gaps in your NI record until April 2025.
Currently, you can fill in gaps going back to 2006. After the April 2025 deadline, you’ll only be able to fill in gaps from the last six tax years. So, it could be worth reviewing your NI record to identify potential gaps now.
The cost of a full NI year will vary depending on which tax year you’re filling in. However, for some people, purchasing an NI year could pay for itself within a few years of reaching the State Pension Age.
Don’t immediately fill in gaps you find – take some time to work out if it could boost your State Pension first. If you’re still several years away from retiring, will you reach the necessary 35 qualifying years without filling in the gaps?
If you decide to fill in gaps in your NI record, you’ll need to contact HMRC by phone and send the money either through bank transfer or cheque.
Do you have questions about your State Pension and other income in retirement?
We can help you create a retirement plan that combines the State Pension with other sources of income you may have. Please contact us to talk about how you could use your assets to fund your retirement.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
