The deadline to top up your state pension is looming – here’s what to do

Pensions have an image problem. It can be daunting trying to navigate them, writes money coach Talia Loderick. But if you do one thing with yours, let it be this...

When you’re young, retirement seems far away. And the older you get, the more demands there are on your money. So it’s understandable why so many put it off for so long.

But, failing to save for retirement is also one of people’s biggest financial regrets – and something we should all consider sooner rather than later.

Off the back of International Women’s Day yesterday, I also want to acknowledge the gender pensions gap, which stands at 35 per cent, according to government figures. That means for every £100 of men’s private pension wealth, women have £65.

One of the main drivers of the gender pensions gap is that across our working lives, women earn less than men. Reasons for this include women’s employment in lower-paid sectors, in less senior roles, and taking time out of work and working reduced hours to care for others, whether children or older relatives.

And for Black and minority ethnic women, the ethnicity pay gap can exacerbate our financial position.

Lower earnings by women across our working lives means less money paid into pension pots and results in less to live on in retirement.

The thing is, despite the importance of pensions, as a subject, it can be dry and complicated – and daunting as a result.

But here’s one thing you can do this month: Check your state pension forecast.

State pension

The state pension is one of the three main pension “pillars”, along with workplace pensions and personal pensions.

The full state pension is currently worth £221.20 a week, which equals £11,541.90 a year.

The amount you receive depends on how many years of National Insurance (NI) contributions you have made – these are called qualifying years.

You usually need at least 10 qualifying years to receive any state pension and 35 qualifying years to receive the full state pension.

Some people have gaps in their NI record. This may be because they were employed but had low earnings, unemployed and not claiming benefits, self-employed but didn’t pay NI contributions because of small profits, were living or working outside the UK, or other reasons.

If you do have gaps in your NI record, you may be able to pay voluntary contributions to plug these gaps and boost your state pension entitlement. Typically, you can plug any gaps in your NI record from the last six years.

However, you currently have until 5 April to plug gaps in your NI record going back as far as April 2006. That’s why now is the time to visit gov.uk to check your state pension forecast and make sure your NI contributions are up-to-date.

£35m pension boost

You can use the online service to check what your pension will be in retirement and take action if you want to boost your entitlement. You can view your NI record, check for any gaps, calculate the difference any payment will make to your state pension and make one payment for however many years you need to top up.

Figures from HM Revenue and Customs (HMRC) reveal that since last April, 37,000 people have plugged more than 68,000 years of missing NI contributions, boosting their future retirement income by £35m.

This could mean a difference of thousands of pounds in state pension entitlement, and it’s especially important for those in their forties, fifties and sixties.

The average online top-up payment is £1,835, and the largest weekly state pension increase is £113.76 a week – an extra £5,915.52 a year. And bear in mind, this amount will increase every year as the state pension rises by the highest of either 2.5 per cent or the rate of inflation or the growth in earnings.

How to check

If you’re below state pension age, visit gov.uk to check your state pension forecast and find out if you’ll benefit from paying voluntary contributions.

You can also contact the Future Pension Centre online or by calling 0800 731 0175.

If you’ve reached state pension age, contact the Pension Service online or call them on 0800 731 0469 to find out if you’ll benefit from voluntary contributions.

Talia Loderick is a money coach. Talia helps people understand and take control of their behaviour with money so they can stop stressing about money and have enough to live well – now and in future. Visit: talialoderick.co.uk