Top up state pension now or risk rate hikes, experts warn

Workers who need to top up their state pension to fill in past contribution gaps should do so before 6 April, or risk paying a hike in contributions, experts have warned.

Savers who are looking to pay voluntary contributions could save over £150 by contributing before the end of the financial year, at which point the government’s concessionary rates expire.

Currently, those covered by the new state pension system, people retiring after 5 April 2016, and who are looking to fill gaps in their national insurance record can do so at “favourable rates”, after which the normal rate for buying back contributions will be £15, or £780 annually.

Royal London director of policy, Steve Webb, said: “For many people, topping up their state pension through paying voluntary NICs can produce a good rate of return because the cost of doing so is subsidised by the government.

“But the price of voluntary NICs will rise sharply in April so those considering doing so may wish to act quickly and could save hundreds of pounds by doing so.”

Under the new state pension system, workers with a gap in their contributions have until April 2023 to fill them, however they would look to save substantially more if they acted quickly.

Different rates are charged depending on the year which the worker is looking to fill their contribution gap, meaning savers looking to contribute for the year 2010/11 would save £153.40, if they decided to do so before 6 April.

Somebody wishing to fill the six years 2010/11 to 2015/16 would save over £500.

Despite this, Shore Financial Planning warned that those who are considering topping up should check whether it will actually boost their state pension, by contacting The Department for Work and Pensions Future Pension Centre.

Shore Financial Planning managing director, Jon Treharne, added: “Many people will be unaware that the cost of filling historic gaps in their National Insurance record is due to be hiked in April.

“I would encourage anyone thinking of filling such gaps and who has checked that they will increase their pension by doing so, to consider whether they would be best advised to top up before 6th April."

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