Did you previously contract out of the State Pension scheme?


How much you are entitled to receive under the State Pension scheme is based upon your National Insurance (NI) record and those retiring after 6 April 2016 will need 35 years’ National Insurance Contributions (NIC) in order to qualify for the full entitlement.

The State Pension currently pays around £165 per week to those who’ve accrued the full 35 years’ NICs, but those with less than this, will receive £4.70 per week less for every year below the maximum entitlement.

We have previously covered the schemes that are in place to help build up extra years in a previous article which you can visit here: https://www.armstrongwatsonfp.co.uk/news/2018/04/national-insurance-cont...

Prior to 6 April 2016, it was possible to contract out of the Additional State Pension whilst you were working, as your employer could have offered a contracted out pension scheme and in those circumstances you would have paid a reduced amount of NIC instead of accruing into State Pension. It was anticipated that the amount you received from the employer’s contracted out scheme would be the same or more than you would have been entitled to under the Additional State Pension.

If you’re not sure if you were contracted out you can ask your employer or check with your pension provider, or if you have some old payslips check the National Insurance Contributions line and if it shows the letter D or N then you were contracted out. If there is a letter A, then you weren’t contracted out.

When you contracted out, you paid a lower amount of NI because you weren’t paying into the State Pension scheme and therefore your entitlement will be affected if you had contracted out at all during your working life. Remember though, that you’ll get a corresponding pension payment from your employer instead. Contracting out ceased on 6 April 2016 so your NIC will now be at the standard rate.

It’s easy to obtain a State Pension forecast online and to check if you have any gaps to fill. You can also check what your State Pension age is, obtain an estimate of how much State Pension you may receive and view your NIC history. Simply visit: https://www.gov.uk/check-state-pension. Once you’ve registered, it is simple to do.

You can make voluntary payments if you have gaps, but it’s worth seeking financial advice to see if this is the best route for you to take. If you’re a man born after 5 April 1951 or a woman born after 5 April 1953, you have until 5 April 2023 to pay voluntary contributions to make up gaps in your record between April 2006 and April 2016.

Contact one of our Financial Planning Consultants at any of our offices in Cumbria, Northumberland, Yorkshire and Scotland on 0808 144 5575.