State pension rates are increasing 4.1% this year
State pensioners are being prompted to check if they’re eligible for a significant increase in their payments, with the potential to add £2,750 to their pension pot. A financial expert has described the offer as “one of the best returning investments” available.
By filling any gaps in your National Insurance record, you could enhance your state pension entitlement. To receive the full new state pension, which is currently £221.20 per week, an individual usually requires 35 years of contributions.
Now is an opportune moment to see if there are any gaps in your contribution history that can be filled in, especially since you can currently makeup for more time than usual. Typically, voluntary contributions can only be made for the past six years, but this has temporarily been extended to include an additional 10 years, going back as far as the 2006/2007 tax year.
Thomas Forrester, trainee financial planner at BRI Wealth Management, highlighted the substantial benefits of topping up. He said: “Any gaps in your record from 2006 to 2023, can be bought back at a cost of £824.20 per year (based on 2022/23 rate).
“Each extra year could increase your state pension by £275 per year, so over 10 years of retirement, that’s an additional £2,750 in total making this one of the best returning investments out there.” It’s worth noting that the extra amount you would get over the course of a decade would likely be even higher.
This is because state pension rates rise each year in accordance with the triple lock mechanism. Payments are set to go up by 4.1% this April, bringing the full new state pension to £230.25 a week.
The triple lock policy guarantees an increase tied to the highest of inflation, average earnings growth, or a minimum of 2.5%. Yet, time is running out to top up over the extended period, as this ends with the turn of the tax year.
Mr Forrester has issued a call to action: “With the April 5 2025 deadline approaching, check your NI record and fill any gaps. Missing the deadline may mean you lose the opportunity permanently.”
Currently, the state pension age stands at 66 for both men and women, but it’s soon going up, heading in stages to 67 and then 68 in the years ahead. Mr Forrester highlighted some other key pensions-related deadlines this April.
He cautioned: “Failing to use your pension allowance before April 5 could mean missing out on thousands in pension contributions and valuable tax relief. The annual pension allowance is the maximum amount you can contribute each year while still receiving tax relief.
“It is currently £60,000, but you cannot contribute more than your total ‘relevant earnings’ in that tax year.” It’s possible to carry forward any unused pension allowances from the last three tax years, but there are important details to be aware of.
Mr Forrester explained: “You must first use this year’s allowance before accessing past allowances, and your contributions are still limited by your earnings. If you wait too long, you may not earn enough in future years to catch up, meaning you could miss out on both contributions and tax relief that can’t be reclaimed.”