Get £50,000 State Pension from just ONE year of NI contributions. ‘Eye-popping difference'

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Get £50,000 State Pension from just ONE year of NI contributions. ‘Eye-popping difference'

To get the maximum basic State Pension, currently worth £179.60 a week for those who retire after April 6, 2016, you need to make 35 years of quali

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To get the maximum basic State Pension, currently worth £179.60 a week for those who retire after April 6, 2016, you need to make 35 years of qualifying National Insurance (NI) contributions during your working lifetime. If you make less than 10 years, you will get nothing at all.

That is a real cliff edge for people who have made, say, eight or nine years of NI contributions.

If you are in this position, it is vital you take steps to make sure you pass the 10-year barrier, said Becky O’Connor, head of pensions and savings at Interactive Investor.

“The amount of State Pension that you could miss out on through not having quite enough qualifying years is eye-popping.”

If uncertain, check your NI contributions record and pull out all the stops to make up any shortfall.

“The difference that one single year of qualifying earnings makes means it could really be worth working for an extra year, if you can,” O’Connor said.

However, that does not guarantee you will qualify for that extra qualifying year for NI purposes, O’Connor warned.

To do that, you need to earn above a certain amount, which is currently set at a minimum of £6,240 a year.

“If you don’t hit that amount, your efforts will not count towards your State Pension entitlement when you turn 66.”

If you do hit that amount and you get hit the target of 10 years of qualifying NI contributions as a result, the difference is huge.

If you fall short of the maximum 35 years of NI contributions, then what you get is reduced proportionately.

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Those who get the maximum amount currently receive annual State Pension income of £9,339 a year.

If they make 10 years, they will get around £2,668 a year. That is well below the full amount, it is better than nothing.

Over the typical 20-year retirement, it would add up to £53,366 in extra State Pension. Just one extra year of NI contributions can go a long way.

So it is worth checking where you stand by visiting Government portal Gov.uk/check-national-insurance-record.

Women who give up work to start a family, jobseekers, those with long-term illnesses and carers are most likely to fall short.

They can plug the shortfall by claiming NI credits, which top up your NI contributions record if you cannot make them in the usual way.

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Each year of NI contributions gives you an extra £250 a year in state pension, so claim all the NI credits you can until you hit the maximum of 35 years.

Others have gaps in their NI record because they were employed but had low earnings, were self-employed but did not pay NI because their profits were too small, or lived abroad.

They may have to buy additional state pension to plug any shortfall. They can do this by making Class 3 voluntary contributions which cost £800 for each year of pension you buy.

This is a good deal given that it is your pension is worth £250, so you could get your money back in just three years.

The longer you live after that, the greater the benefits.

O’Connor said there is a pensions safety net for people who fail to make enough NI contributions.

“They could be eligible for means-tested Pension Credit, which is designed to support low income pensioners and can take your income up to £177.10 a week if you are single and up to £270.30 a week for couples.”



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