Martin Lewis has tackled the subject of voluntary National Insurance contributions (Image: The Martin Lewis Money Show/ITV)
Martin Lewis has detailed a state pension “rule” that the finance guru says should be ignored in only one “exception”. The Money Saving Expert founder recently tackled the subject of voluntary National Insurance contributions in his BBC podcast.
To get any of the new state pension, you need to have paid at least 10 years’ worth of National Insurance. NI can be paid via work, credits if you were not working, or ill, or a parent or carer, or by making voluntary contributions. A podcast listener asked Lewis if, at the age of 36, she should pay contributions to cover a two-year gap in paying NI and bring her qualifying years up to 10.
She asked: “I am currently 36. Is it worth paying the two [years] now or would it be considered a waste of money as I am likely to reach the 35 years needed for a full state pension anyway?”
Lewis said the first thing he would do is look at her pension projection on the gov.uk website.
This would reveal whether she was on track for the full state pension. The Government’s Check your State Pension forecast webpage allows people to find out how much state pension they could get, when, if it can be increased, and how.
The finance expert suggested that if a pension projection shows you are on track for the full state pension, then plugging any NI gaps is “probably overkill”.
Lewis added that the only time he would make an exception is if you could buy these years really cheaply.
He said he has known people who have been able to buy a part-year for £15. Lewis said part years are where you have almost got all the contributions you need to get a year, but not quite.
“Normally, a full year is going to cost you around £900. But if you could buy a part-year for £15, £20, or maybe £50 quid… I’d be tempted to go, you know what, it’s £50. I’m just going to do it, just on the off-chance that I might need it at some point in the future,” Lewis said.
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Lewis told podcast listeners that, in the caller’s situation, to pay for an extra year of NI at the full price probably wouldn’t be worth it.
He added: “You are so young at 36 for doing this. There are a lot of risks that you’re just going to be buying money, throwing stuff away – there are big risks for you that the state pension might become means-tested once you are older.
“We don’t know that. I don’t think that’s going to happen imminently for people retiring now. But you are talking about retiring in 30-35 years. Who knows what will be happening in the UK to state pensions in 30-35 years?”
What are the rules on plugging National Insurance gaps?
Gaps can emerge in your National Insurance record if you do not pay it. According to the gov.uk website, this might be because you were:
- living or working outside the UK
- unemployed and were not claiming benefits
- self-employed but did not pay contributions because of small profits
- getting National Insurance credits for less than a full tax year
- employed but had low earnings
The Government recommends checking your NI record to check if there are any gaps. This allows you to determine the cost of making voluntary contributions.
The gov.uk website urges anyone who thinks their National Insurance record is wrong to contact HM Revenue and Customs.
