For certain employees (men born after the 5th of April 1951, or women born after the 5th of April 1953) the fast-approaching deadline in early April is the last opportunity to fill in any gaps in their National Insurance Contribution (NIC) record dating back to 2006. Back paying any gaps in NICs could add thousands of pounds to annual state pension payments, a vital source of income for many.
The leading pensions and financial services consultancy warns that individuals with less than 35 qualifying years – years where they have paid or been credited with NICs – do not qualify for the full state pension. However, some in this situation can choose to backfill their NIC payment record – and will see their money returned in their future state pension. Employers play a key role in raising awareness of this deadline, further adds the firm, as employers are often a core trusted source of retirement saving information for their employees.
Commenting on the need for employers to act now so their workers don’t miss out, Hannah English, Head of DC Corporate Consulting, Hymans Robertson, says: “It’s crucial that employers effectively communicate to their workers the potential returns if they top-up their NICs. For example, it would cost an individual roughly £824.20 to fill a one-year NIC gap based on the 2022-23 rate (slightly more if the gap is in 23/24 or 24/25). Based on the same rate, this would add £328.64 to their yearly state pension income. After only three years of receiving their state pension they would see their money back in their pocket – with some to spare as well.
“Employers have a duty to help alleviate the gender pensions gap and this change will disproportionately affect the female workforce. Women are more likely than men to have worked part-time or had career breaks, meaning that a higher proportion of women have gaps in their NIC record. If employers are serious about closing the gender pensions gap, raising awareness of the April deadline to top up NICs – and playing a clear role in communicating this change – is a key step that they could make towards a more equitable pensions system.”
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