Financial Planning Resources

Extend your financial planning knowledge through our resources which include blogs, podcasts, events and more.

Why You Should Check Your State Pension Now

If you haven’t already, make it a priority to check your state pension before April 2025. Understanding your state pension entitlement is a crucial part of your retirement planning, and acting now could make a significant difference to your future income.

Your state pension is likely to form an important foundation of your retirement pot. The amount you’ll receive depends on how many ‘qualifying’ years of National Insurance (NI) contributions you have. These qualifying years include NI contributions made while working, as well as credits you may receive if you were unable to work due to certain circumstances.

To qualify for the full state pension – currently £221.20 per week – you generally need 35 years of NI contributions. If you have gaps in your record, you might not receive the full amount. Fortunately, there’s an opportunity to fill these gaps by paying voluntary contributions, but this window closes in April 2025.

Your state pension is likely to form an important foundation of your retirement pot, but gaps in your National Insurance record could reduce what you receive.
Dennis Hall, Chartered Financial Planner, Yellowtail Financial Planning

Why pay voluntary contributions?

If you’re close to state pension age or know you won’t achieve the required 35 qualifying years during your working life, paying voluntary contributions can help you:

·       Boost your state pension entitlement.

·       Ensure you qualify for the full amount, providing a more secure retirement income.

The cost of plugging these gaps varies depending on the tax year in question. For recent years (2023/24 and 2024/25), it’s £907.40 per year (£17.45 per week), while older years (2006/07 to 2019/20) typically cost £824.20 per year (£15.85 per week). If you’re self-employed, the rates are usually lower. You can use the National Insurance record checker on GOV.UK to see where you stand and calculate the cost of filling any gaps.

What’s the potential benefit?

Each additional year of NI contributions can increase your state pension by up to £6.32 per week (£328.64 a year), before annual increases. This means a one-off payment to cover a missing year could offer a significant return over time. For example:

·       Paying £824.20 for a missing year could result in over £1,600 if you live another five years, or more than £6,500 if you live another 20 years.

While it may take several years to break even, the state pension remains one of the best value-for-money options available. Tools such as MoneySavingExpert’s State Pension top-up calculator can help you assess how long it would take to recoup your investment based on your life expectancy.

Each additional year of National Insurance contributions can increase your state pension by up to £328.64 annually, making it one of the best value-for-money options available.

Why act now?

The option to top up your state pension with voluntary NI contributions is only available until April 2025. After this, the opportunity to backfill gaps as far back as 2006 will end, and you’ll only be able to fill gaps for the previous six tax years.

By taking the time to review your state pension record and filling any gaps now, you can ensure you’re making the most of this valuable resource for your retirement. The Pensions and Lifetime Savings Association suggest a single person needs £31,300 a year for a moderate retirement. The full state pension at £11,500 gets you a good third of the way there. Don’t miss out on the chance to maximise your income.

How does this fit into your bigger picture?

Your state pension plays a vital role in your overall financial plan. To understand how it integrates with your savings and investments, consider speaking to a financial planner. They can provide clarity on how your state pension will impact your future income and help you make informed decisions to support the lifestyle you want in retirement.

Taking the time to review and fill gaps in your state pension now could make a significant difference to your future income and lifestyle in retirement.

ABOUT YELLOWTAIL

Founded by Dennis Hall, Yellowtail are the trusted financial planners who advise affluent individuals & families in the South West and across the UK. Yellowtail’s experts provide the clarity, control and confidence to guide you through financial planning, estate planning, pension transfers and investment management directing your journey towards a prosperous retirement and financial peace of mind.