Parents who took time out of work to care for young children may have “missing” National Insurance years – which can reduce a person’s state pension rate entitlement
Millions of parents are being urged to review their National Insurance records before April to avoid potentially losing thousands of pounds from their state pensions.
The warning is particularly relevant for parents who took time off work to care for young children, either full-time or part-time, over the past decade, as they may have “missing” NI years that can reduce their state pension entitlement.
Amy Knight, a personal finance expert at NerdWallet UK, said: “Having babies can lead to losing out on more than just sleep. Stay-at-home parents, or those working part-time hours, may have ‘missing’ or ‘partial’ years on their NI record, where they have not paid in enough NICs, putting their state pension in jeopardy.”
People have until April 2025 to fill NI gaps dating back to 2006. After April, they will only be able to make voluntary contributions for six tax years, which could cost them thousands of pounds.
NI years are accumulated through employment or by receiving NI credits during periods of unemployment, illness, or while fulfilling parental or caregiving responsibilities. Typically, 35 years of contributions are required to receive the full new state pension, but some individuals may need more.
Those with gaps, which may have occurred when credits were not claimed, can increase their state pension by purchasing additional NI years to fill these gaps. Nerd Wallet has issued a critical alert for approximately 1.6 million parents with young children from 2016 to 2018, urging an “urgently” check of their NI records before the tax year concludes, reports the Express.
Parents who took time off work until their child turned four could face a £1,310 annual hit to their state pension income. Ms Knight highlighted the long-term impact: “Over a 25-year retirement, this could amount to a loss of almost £33,000 or more as the state pension increases.”
She then guided through the process: “It takes just 15 minutes to log into the Government website to check your NI record, find out if you’re eligible to make voluntary payments to turn these into qualifying years, and complete the transaction to HMRC using online banking.”
The cost of filling in missing contributions comes with a warning: “Paying voluntary contributions usually costs £17.45 for every week you didn’t pay in during a given tax year. Filling in four years’ worth of gaps could cost more than £3,600.
“However, for most people, the amount you’ll get back in state pension over the course of your retirement will make this outlay of cash very worthwhile.”