PENSION POWER
Five easy ways to boost your state pension – it could add up to £11,122 to your savings
You could be missing out on cash worth hundreds of pounds
THOUSANDS of people are missing out on ways to turbocharge their state pension payouts.
The benefit is the government's primary way of supporting people in retirement.
1
Those claiming the full flat rate state pension receive £221.20 a week, equal to £11, 501 a year.
The government currently guarantees the payment rises by the highest of average earnings, inflation or 2.5% through what’s known as the triple lock guarantee.
However, not everyone qualifies, it all depends on your National Insurance contributions.
You need at least 10 years’ worth of NI credits to get any state pension at all and 35 years to qualify for the full amount.
Read more on pensions
You can check your state pension forecast and state pension age through the government’s Check your State Pension tool online at gov.uk/check-state-pension or through the HMRC app.
People below state retirement age can log in to the service using their personal tax account details – or set one up at gov.uk.
Here is how to maximise your state pension to get the biggest payout possible.
TOP UP MISSING YEARS - £328
People who have taken career breaks, for example, to raise children, could find that they don’t have the full 35-year record of NI contributions.
Most read in Money
However, you may be able to buy them which is often a financially shrewd move.
The cost of buying contributions costs £824.20 and applies to all years from 2006/07 to 2022/23. Or for the tax year 23/24 the cost is £907.40.
How to track down lost pensions worth £1,000s
The cost is lower if you have already made some partial contributions in a particular year.
Buying one extra year of contributions would generally boost your pension pay out by £328.64 a year in retirement.
This means you’d usually get your money back within three years of drawing your pension – or four years if you allow for basic rate income tax.
As a result, for most people who claim the state pension for at least four years, topping up is very good value.
Until April 2025, people can make backdated contributions for missing years as far back as 2006.
But after next year, contributions will only be able to be backdated for a maximum of six years.
So it’s worth acting sooner rather than later to find out if you have gaps and whether it’s worth filling them in.
Through the government’s online tool, people can choose which years they would like to fill and pay within the service too.
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you're self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You'll usually pay National Insurance Contributions (NICs) when you're over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 - so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you're not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don't need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self-assessment tax return.
CLAIM CHILD BENEFIT - £328
Workers can get valuable state pension credits in place of NI contributions if you claim Child Benefit.
This means it’s important to claim in your name, rather than, for example, letting a working partner claim in theirs.
As with buying top-ups, a year's worth of Child Benefit credits can boost your state pension by around £328.64 a year.
If you don't need the weekly NI credit from claiming Child Benefit, for example, if you have gone back to work and and have a family member under state pension age looking after children under the age of 12, you can also transfer it to them.
This is known as Specified Adult Childcare Credit with the the working parent essentially transferring their NI credits to a grandparent, for example.
There is only one credit available for each Child Benefit claim no matter how many children.
It means that if two grandparents provide childcare for their daughter’s two children, there is only one credit available for transfer.
You can apply to transfer credits by completing the CA9176 form on the gov website, printing and posting it to HMRC.
How to claim Child Benefit
Child benefit is worth up to £1,331 a year for your first or only child and up to £881 a year for additional children.
This works out at £102.40 every four weeks or £25.60 a week for your first child and £67.80 every 4 weeks or £16.95 a week for their siblings.
There is no limit on the number of children that can be claimed for.
Applying is straightforward and can be done in minutes at gov.uk or through the HMRC app.
Parents with a newborn baby should make a claim online as soon as possible and could then receive their first payment in as little as three days.
You can also backdate claims for up to three months.
Parents can make a claim and then choose to opt out of receiving Child Benefit payments can still receive National Insurance credits if one parent is not working.
National Insurance credits build up your entitlement to the state pension.
PENSION CREDIT - £3,900
It’s estimated around 808,000 older households on low incomes are missing out on an average of £3,900 a year in pension top-ups.
Pension Credit tops up weekly income to £218.60 if you’re single or joint weekly income to £332.95 if you have a partner.
You may also get additional pension credit if you are disabled, have caring responsibilities or have to pay certain housing costs such as mortgage interest payments.
The benefit also unlocks other help such as council tax reductions and a free TV licence.
You can start your application up to four months before you reach state pension age.
Find out more here about applying for the boost.
How to apply for pension credit
YOU can start a pension credit application up to four months before you reach state pension age.
You can claim any time after you reach state pension age but your claim can only be backdated for three months.
To claim, you will need:
- your national insurance number
- information about your income, savings and investments
- your bank account details, if you’re applying by phone or by post
If you’re backdating your claim, you’ll need details of your income, savings and investments on the date you want your claim to start.
You can apply online via if you've already claimed your state pension or you're not responsible for children.
If not, you can apply by calling 0800 99 1234 or by printing out, completing and posting this .
DEFER YOUR PENSION - £666
You don’t receive state pension automatically once you reach state pension age you have to claim it.
If you're approaching state pension age it could work out financially beneficial to delay taking your payments, if you can afford to do so.
This is because when you do start collecting the payments, you'll get more.
At the moment for every nine weeks you delay taking the state pension, the payout rises by 1%.
This means that for every year you defer you boost your state pension by around 5.8% per year.
This works out as an extra £12.82 per week or £666 a year. Though this assumes no annual increase in the state pension, if there is an increase the amount you get could be larger.
However, there are a few things to consider before deferring a state pension.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "Make sure that in doing so you aren’t inadvertently pushing yourself into a higher tax bracket when you do come to claim state pension or pushing yourself out of eligibility for benefits you would otherwise have received.
"It’s also worth thinking about whether you will truly get your money’s worth by deferring.
"Deferring by one year means you lose £11,500 straightaway if you receive a full new state pension. It will take years to make that money up.
"If you are in good health then that may not be a problem but if your health isn’t great you risk losing out.”
CHECK FOR UNDERPAYMENTS - £5,900
An estimated 237,000 people were underpaid by the state pension as far back at 1985 a result of system errors.
The Department for Work and Pensions estimates around £835million is owed to pensioners in total.
Some have received compensation worth £5,000 on average but around 137,000 could be in line for cash.
Many of the people owed money are women who retired under the old state pension system and didn't receive the entitlement they were due under their husband's National Insurance record.
Others did not get the uplifts they were eligible for when their husbands died.
READ MORE SUN STORIES
You can go to the DWP directly to find out whether you have been affected.
An online tool launched by former pensions minister Steve Webb on behalf of actuarial firm LCP can also help women check if they might be affected. Go to lcp.com to find out more.
Topics