National Insurance Contributions (NICs) determine an individual’s entitlement to certain state benefits – in particular the State Pension. Essentially, the amount of State Pension received on retirement, if any, is dependent on the number of ‘qualifying years’ that you have built up over your lifetime.
A qualifying year refers to a tax year during which you have sufficient employment earnings (currently £120 per week), or otherwise qualify for certain ‘NIC credits’. At present, ten qualifying years are required to guarantee the minimum State Pension, and thirty five years to secure the maximum entitlement.
Many people are unaware of gaps in their record. A common misconception is that this is only a concern for unemployed individuals or those with lower earnings; however, gaps can occur for a number of other reasons. .
Take an individual who is working abroad, for example. Ordinarily, while working outside of the UK an individual will pay the local equivalent of that country’s social security contributions. In doing so, they may create a gap in their UK NIC record and consequently miss out on the State Pension entitlement that they were expecting.
This also includes individuals that have taken career breaks – for example, to care for loved ones or live off of a windfall or inherited wealth. Equally, this is also relevant for self-employed individuals with fluctuating profits. In such cases, it is easy to overlook potential gaps and fall short of the crucial number of qualifying years.
For those with gaps in their NIC record, all is not lost!
This is where voluntary NICs come into play. Where eligible, an individual can top up any gaps in their NIC record and claw back their State Pension entitlement by way of voluntary contributions. It should be noted however, that HMRC will generally only allow you to remedy gaps within six years of the end of the tax year for which the gap occurred, so action should be taken sooner rather than later.
National Insurance Contributions (NICs) determine an individual’s entitlement to certain state benefits – in particular the State Pension. Essentially, the amount of State Pension received on retirement, if any, is dependent on the number of ‘qualifying years’ that you have built up over your lifetime.
A qualifying year refers to a tax year during which you have sufficient employment earnings (currently £120 per week), or otherwise qualify for certain ‘NIC credits’. At present, ten qualifying years are required to guarantee the minimum State Pension, and thirty five years to secure the maximum entitlement.
Many people are unaware of gaps in their record. A common misconception is that this is only a concern for unemployed individuals or those with lower earnings; however, gaps can occur for a number of other reasons. .
Take an individual who is working abroad, for example. Ordinarily, while working outside of the UK an individual will pay the local equivalent of that country’s social security contributions. In doing so, they may create a gap in their UK NIC record and consequently miss out on the State Pension entitlement that they were expecting.
This also includes individuals that have taken career breaks – for example, to care for loved ones or live off of a windfall or inherited wealth. Equally, this is also relevant for self-employed individuals with fluctuating profits. In such cases, it is easy to overlook potential gaps and fall short of the crucial number of qualifying years.
For those with gaps in their NIC record, all is not lost!
This is where voluntary NICs come into play. Where eligible, an individual can top up any gaps in their NIC record and claw back their State Pension entitlement by way of voluntary contributions. It should be noted however, that HMRC will generally only allow you to remedy gaps within six years of the end of the tax year for which the gap occurred, so action should be taken sooner rather than later.
.jpg)
