Tax advice of the week: catch up on NI contributions

Aug 28, 2009

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Anyone due to reach retirement age by 5 April 2015 is allowed to top up any missing years in their National Insurance (NI) records going back to April 1975. And that will increase their state pension, says Harriet Meyer in The Observer.

To qualify for a full basic state pension, currently £95.25 per week, men and women retiring after April 2010 need 30 years' worth of NI contributions.

But is it worth topping up, particularly since rates were hiked by 50% to £12.05 a week from 1 April this year? Yes, says Tax Tips & Advice. Since you need 30 years of NI contributions to qualify for a full state pension, a year's worth of contributions – £626 (£12.05 x 52) – buys you 1/30th of the basic state pension.

At current rates, that's £165 per year for life – ie, (£95.25 x 52)/30. So "you'll only have to draw your pension for four years to get your money back".

Note you can buy a maximum of six years' contributions and you must already have at least one year on record with HMRC. Topping up may not suit those on lower incomes, as it can threaten their entitlement to pension credits.

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