State pension payments worth billions of pounds are being sacrificed because people don’t know they’re entitled to claim them, a report reveals today.
For every year you work and pay National Insurance, you build up an entitlement towards your state pension, worth about £260 a year.
If there are any gaps, you can rectify them by paying voluntary contributions for any of the past six years.
But there are also eight ways you can earn state pension credits when you are not working, many of which are often overlooked.
Looking ahead: For every year you work and pay National Insurance, you build up an entitlement towards your state pension, worth about £260 a year
In fact, there are so many ways that there should be few cases when people of working age are not earning them, according to former Pensions Minister Steve Webb.
Webb, now a partner at consultancy Lane Clark & Peacock which carried out the research, tells the old joke about only ‘poets and prisoners’ not getting National Insurance credits.
‘You can go online and see your National Insurance record,’ he says. ‘Where there are gaps, you should ask why. Virtually everyone should be covered by one of the entitlements.’
Here are the eight ways you may have built up your state pension entitlement without realising. Some claims can be backdated by three months, others to 1975, so it’s worth checking and getting in touch with Revenue & Customs if you think you are owed credits.
You can check your record at www.gov.uk/check-state-pension.
1. Anyone who takes time out of work to look after a child under 12 can be entitled to credits towards their state pension. But you will not necessarily receive them automatically and thousands of parents miss out every year. Due to a quirk in the system, to receive pension credits you have to apply for child benefit even if you are not eligible for it.
Furthermore, pension credits are awarded to whichever parent completes the form to receive child benefit. If the working parent applies, the credits go to waste because they are already receiving credits through work. Around 200,000 parents don’t receive pension credits due to this slip-up, which means they risk facing a poorer retirement.
2. If you drop off a grandchild at school or provide childcare over the phone or online due to Covid restrictions, you may be eligible for a state pension boost. To be eligible, grandparents must not be working, be under state pension age and looking after a child under the age of 12. Aunts, uncles and other close relatives may also be eligible.
3. If you are a carer for at least 20 hours a week for someone with a disability, you may be entitled to state pension credits. You should receive credits automatically if you claim a carer’s allowance. If you don’t, you must apply for them. Thousands of carers don’t know this and miss out.
4. State pension credits are awarded to anyone who receives statutory maternity, paternity or adoption pay. But if your earnings are below the limit for paying National Insurance contributions, you will need to apply to Revenue & Customs.
5. If you receive statutory sick pay, you should receive credits automatically. However, if the amount you get is below the lower earnings limit for National Insurance, you will have to apply to Revenue & Customs.
6. If you are out of work, but looking for a job, you should receive pension credits. You may have to apply for them if you do not qualify for Jobseeker’s Allowance, employment support allowance or universal credit.
7. State pension credits are awarded to anyone who accompanies their spouse who works in the Armed Services and is posted overseas. You can claim for any period as far back as April 6, 1975.
8. If you attend court for jury service, you can claim credits for that period. You can also claim if you were imprisoned, but later had an offence quashed.
MOST DON’T KNOW WHAT THEY’RE DUE
More than three quarters of workers do not know what income they will get from their pension when they retire, a new survey reveals. In fact, half have no idea how many pension pots they have and could miss out on retirement riches, according to the findings from consumer website MoneyMagpie and online pension provider PensionBee.
Around 45 per cent say they will be relying on a state pension for their retirement income. Jasmine Birtles, money expert and founder of MoneyMagpie, says: ‘I’m really sorry to see that nearly half of the population are planning on relying on the state pension to keep them going later on in life.
‘I’d like everyone to have enough money to enjoy themselves and have the freedom to stop working if they want. Just putting a little more into a pension and investment, such as an Isa, each month can make all the difference.