There is an important change in the UK State Pension system that will take place in July 2023. If you’re aged between 45 and 70,
this change could affect the amount of State Pension you are eligible for, making it a critical issue to understand.
As it stands, the State Pension serves as the cornerstone of retirement income for many, providing over £10,600 per year, indexed for life. However, to qualify for the full State Pension, you must have contributed to the National Insurance system for 35 full years.
If you’ve taken a career break, worked abroad, or didn’t meet the income threshold in a certain year, your National Insurance record could be incomplete.
What’s changing?
Until now, you could make voluntary contributions backdated to the 2006-2007 tax year to fill any gaps in your National Insurance record. From July 31, 2023, this look-back period will be reduced to just six years. This means that any incomplete years before 2017-18 will remain as such, and you will not be able to make them up.
The clock is ticking, and this is an opportunity to maximise your State Pension benefits. Remember, after July 31, 2023, you will no longer be able to backdate contributions more than six years to make up for missed years.
Useful links:
Check your state pension
Check your National Increase Record
Money Savings Expert guide
Future Pension Centre
To ensure you’re prepared for this change, consider taking the following steps:
Check Your National Insurance Record
Check whether you have sufficient years in the system by logging into the gov.uk website and examining your State Pension forecast. This will provide information about how many more years you need to contribute to be eligible for the full State Pension.
Determine Your Future Contributions
Based on your current record and future work years, estimate if you’ll reach the 35- year mark. If you believe you might not, consider making voluntary contributions to claim missed years.
Decide on the Next Steps
Assess the cost of filling up a year of missed contributions against the potential long-term returns. One year’s National Insurance contribution equates to approximately £303 of annual State Pension income, indexed for life. This investment could result in significant, inflation-protected returns over your lifetime.
Deciding whether to make these contributions can be a complex process. You may want to consider consulting professional resources or the government helpline, Future Pension Centre, for further advice.
Please consider this information carefully, as it may significantly impact your financial future. Share it with anyone who could benefit from it. If you have any questions or require further clarification, don’t hesitate to seek advice.
This article was submitted as a guest article by Kron Wealth.
Kron Wealth is a trading style of Sandringham Financial Partners Ltd, which is authorised and regulated by the Financial Conduct Authority. Sandringham Financial Partners Ltd is a wholly owned subsidiary of M&G plc.
E: hello@kron.uk | W: www.kron.uk T: 0207 173 6544
