Martin Lewis, the Money Saving Expert, has shared how people aged between 45 and 70 could potentially turn £800 into more than £5,000 by boosting their state pension.
In order to get the full state pension, members of the public will often need to have made national insurance payments for around 35 years.
Some people may have gaps in their payment history due to periods of low income, spending years abroad or unemployment.
The current full state pension is £185.15 per week. Those without adequate national insurance years will receive a reduced pension.
In his latest newsletter, Lewis explains that these national insurance “gaps” can be amended by buying years back.
Under current rules, individuals may buy national insurance years back to 2006.
However, these rules are set to change in 2023. As of next April, a limit of buying six years will be introduced.
Breaking down the process, Lewis said the first step is to “check your pension forecast and/or check how many national insurance years you have”.
He said checking now is key, as those at or near state pension age will find it “realtively easy” to see if topping up their years may help.
“If you’re younger, the check shows how many years you already have, and how many are left. If a shortfall is likely and you’ve national insurance gaps for 2006 to 2016, you need to decide by the tax-year end whether to top up,” he added.
The change is less likely to affect young people, as they still have more time to earn the maximum state pension through working years or national insurance credits.
Therefore, Lewis described it as a “risk” for those under the age of 45 to buy national insuarance years.
For those over 45 and with the money to do so, “it’ll be very lucrative”, Lewis said.
“Each £800 could net a (mostly) inflation-proof £5,800. A full voluntary national insurance year costs £800ish but could add up to an extra £275 annually to your state pension – so the break-even point is hit if you live just three years after getting your pension,” he explained.
“If a man who’s reached age 66 lives the typical 19 more years, a woman 21 more years, then for EACH £800 spent, a man can expect to get £5,300 extra pension, a woman £5,800.”
While this could benefit many, Lewis has warned that there are “many complex” factors involved and that these calculations may not be applicable to everyone. You can check your record through the government website here.
