Britons could potentially see a significant increase of £74,100 in their state pension by rectifying their National Insurance (NI) contributions, as suggested by financial expert Martin Lewis.
Lewis stresses the importance of ensuring full payment of NI in order to guarantee the full state pension. He recommends that individuals can make up for missed NI payments by paying £800 to HMRC, resulting in a pension increase of £330 annually. Based on these calculations, the cost can be recovered in less than three years.
In practical terms, a man with an average lifespan of 85 could gain an additional £5,400, while a woman with a typical life expectancy of 87 could receive an extra £6,100 based on this scenario. However, Lewis highlights that these figures could significantly increase when accounting for multiple years of missed NI contributions.
According to Martin Lewis, individuals have the option to buy back a maximum of 13 years of missed NI contributions, which amounts to £10,400. Although this may appear to be a substantial sum, the potential long-term benefits for those living into their 80s are considerable.
Based on the average life expectancy, the maximum boost to the pension throughout retirement could potentially amount to £74,100, with men potentially gaining £70,200 and women £79,300.
Lewis cautioned Britons to ensure that they are fully updated on their NI contributions during the Martin Lewis Money Show Live on ITV, as there is a deadline to claim back missed years of NI contributions by April next year.
Typically, around 35 full NI years are necessary to secure the maximum state pension, but many individuals may have missed out due to various reasons such as low earnings, unemployment without claiming benefits, not paying contributions as self-employed due to small profits, or living and working outside the UK.
The HMRC offers several methods to check the status of NI contributions and estimate potential pay-outs by filling in any gaps. They recommend utilizing their website or contacting the National Insurance Contributions Office. Additionally, the moneysavingexpert.com website provides a useful calculator to determine the potential value of topping up NI contributions.
Ensuring that NI contributions are fully paid could significantly and positively impact retirement funds. Therefore, being mindful of contributions and rectifying any gaps could be crucial in securing a comfortable and financially stable retirement.