The UK government has extended the deadline for state pension top-ups, providing individuals with the opportunity to significantly increase their retirement income.
Previously set to expire on 5 April, the deadline has now been extended to the end of July, offering people more time to take advantage of what some experts are calling a "bargain price".
Typically, you can only backdate the past six tax years to make a top up national insurance contribution for any incomplete years. However, until July, you will be able to backdate a further 10 years (back to April 2006).
By plugging gaps in your national insurance record, you can increase your entitlement to state pension benefits. This may sound complicated, but it could generate a better rate of return than almost any other way of using savings, according to former pensions minister Steve Webb, who is now a partner at the actuarial business LCP.
You will need 35 qualifying years of full national insurance contributions to be entitled to the full state pension.
It is important to note that not everyone is eligible for this deal. If you are on track to have the full 35 years by the time you retire, this is not relevant to you.
How can I find out my state pension forecast?
This can be done directly through the HMRC website.
Once you have logged into the site using your government gateway account, it will provide you with a forecast of your state pension to see if you are on track to receive the full allowance. This will be quoted on a weekly basis and is currently valued at £185.15 per week if you qualify.
How can I see a breakdown of my national insurance history?
On the same website, you will also be able to see a full national insurance contribution history, of which it will tell you of any incomplete years and what voluntary contribution will be needed to complete it.
What is the potential benefit and why should I do this?
For every complete year, it equates to an extra £275 of annual state pension benefit. For example:
John will have 34 qualifying years of national insurance contributions by the time he retires.
During the 2010/11 tax year he was out of work for a period, resulting in incomplete year.
HMRC state that to plug this gap he will need to make a £800 voluntary contribution.
If £800 top up equates to £275 of annual benefit, £800 divided by £275 = 2.9. John would need to live 2.9 years into retirement to get a return on his investment.
Experts suggest that this deal is a no-brainer for those who are eligible. By paying a relatively small sum now, you could secure a significant increase in your retirement income for years to come.
The state pension income will also be protected by the triple lock guarantees which will see the sum rise each year by the higher of 2.5%, inflation or average earnings.
It is also worth noting that this deal is not the only way to boost your retirement income. There are other options available, such as personal pensions and workplace pensions. It is important to research all options and consider which one is right for you. It is essential to consider all options and seek Reeves advice before making any decisions.
In conclusion, the UK government's decision to extend the deadline for state pension top-ups is fantastic news for individuals looking to secure their financial future in retirement.
The articles are for information only and should not be construed as advice or a recommendation. Please seek independent financial advice before taking any action. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.
Note that investments can go down as well as up and you may not get back the full capital invested.