How to plug the pension gap by buying National Insurance credits  

Without accessing support from these official channels, said MoneySavingExpert, it is not possible to confirm which “incomplete” years are worth filling or to make your payment with your reference number.

Once you have the 18-digit number, said CityAM, paying for the missed years can be done by online bank transfer, at your bank or building society, or by sending a cheque to HMRC.   

“With the clock ticking,” the newspaper said, “anyone looking to make up the shortfall should start the process straightaway to ensure you make up those missed years before it is too late.”  

Is it worth it? 

Buying extra credits is “not a decision to be taken lightly”, said The Money Edit, as it costs £824 to add an extra year of voluntary contributions – “a significant sum for many”.  

For that amount you’ll get an extra £5.29 to your weekly state pension, or £275 per year – or £5,500 over a 20-year retirement, the website said. The rate for a self-employed person is lower at £163.80 per year. 

If you buy five years of NI for £4,121, said MoneyWeek, that will boost your retirement pot by £27,500 – a return of nearly 600%. “That’s a pretty good return on the initial investment,” the financial website said, especially if you’ve got the extra cash and were thinking of investing it in something else.  

It may not be worthwhile for everyone though. 

The payoff may be limited if you don’t plan to retire in the near future, said The Telegraph, because if you still plan to work “you cannot get the money back if you overpay and will likely make up the contributions regardless”. 

Additionally, if you are ill, the newspaper said, you “may not be drawing on the state pension for very long and spending cash now may not be advantageous”.  

Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FT Adviser, This Is Money, the Mail on Sunday and MoneyWeek. This article is based on information first published on The Week’s sister site, The Money Edit. 

Article source: https://www.theweek.co.uk/business/personal-finance/959974/how-to-plug-the-pension-gap-by-buying-national-insurance-credits