An expert has warned that there are only a couple of months until a crucial tax deadline passes
Parents are being warned that they could lose out on as much as £33,000 for their retirement if they don’t take action. Many parents may have taken time off work over the years to help care for young children. However, this could have had a detrimental effect on their national insurance record, which is responsible for determining how much they could earn in a state pension.
Personal finance expert Amy Knight at NerdWallet UK warned that if affected parents don’t take action before the end of the tax year, they could risk losing tens of thousands of pounds. She highlighted that many may not have paid enough into their National Insurance contributions, putting their state pension in “jeopardy”.
Amy said: “Having children can result in more than just a lack of sleep. Stay-at-home parents or those working part-time may have ‘missing’ or ‘partial’ years on their National Insurance record, where they haven’t paid enough NICs, putting their state pension at risk.
“Approximately 1.6 million parents who had young children between 2016 and 2018 need to urgently check their NI record before the tax year ends. Those who waited until their child started school at age four before returning to work could see their annual state pension income reduced by £1,310 per year.
“Over a 25-year retirement, this could amount to a loss of almost £33,000 or more as the state pension increases. Currently, voluntary contributions are being accepted for the tax years 2016-17 and 2017-18, but time is running out.”
Plugging in the gap for your National Insurance contributions
Generally, people can only make voluntary contributions to their National Insurance record over the previous six years from that certain tax year. While this was previously extended slightly over the last tax year, this six-year limit will be reimposed on April 5 of this year.
Amy added: “The opportunity to fill gaps in your NI record for these years will end at midnight on April 5, 2025. Now is your chance to make the years you spent juggling toddlers count. It takes just 15 minutes to log into the government website to check your NI record, find out if you’re eligible to make voluntary payments to turn these into qualifying years, and complete the transaction to HMRC using online banking.”
Full details on how you can make voluntary National Insurance contributions can be found on GOV.UK here.