Martin Lewis shares tip to boost pension fund by £5,000
Martin Lewis, the money-saving expert, has shared how people aged 45-70 could potentially turn £800 into over £5,000 by boosting their state pension.
In order to obtain the full state pension, members of the public will often need to have contributed to national insurance for around 35 years.
Some people may have gaps in their payment history due to periods of low income, years spent abroad, or unemployment.
Current full board is £185.15 per week. Those who do not have enough years of national insurance will receive a reduced pension.
In his latest newsletter, Lewis explains that these “gaps” in National Insurance can be corrected by buying back years.
Under current rules, individuals can buy National Insurance years dating back to 2006.
However, these rules are expected to change in 2023. As of next April, a six-year purchase limit will be introduced.
Breaking down the process, Lewis said the first step is to “check your pension forecast and/or check how many years of National Insurance you have”.
He said it’s essential to check now because those who have reached or are approaching state retirement age will find it “really easy” to see if supplementing their years can help.
“If you are younger, the check shows how many years you already have and how many you have left. If a shortfall is likely and you have national insurance gaps for 2006 to 2016, you must decide by the end of the tax year 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 years of work or national insurance credits.
Therefore, Lewis described it as a “risk” for those under 45 to buy National Insurance years.
For those over 45 who have the money to do it, “it’s going to be very lucrative,” Lewis said.
“Every £800 could yield £5,800 (mostly) inflation proof. A full year of Voluntary National Insurance costs £800 but could add up to an extra £275 a year to your state pension – so you break even if you live only three years after receiving your pension,” he explained.
“If a man who has reached the age of 66 lives 19 years longer, a woman 21 years longer, then for EVERY £800 spent a man can expect to receive £5,300 in additional pension, a woman £5,800.”
While this could benefit many, Lewis warned that there are “many complex factors” involved and these calculations may not apply to everyone. You can check your record on the government website here.