In Focus: Tax  

What every woman should know about pensions

Simoney Kyriakou

Simoney Kyriakou

Tell your family. Tell your friends. Tell your clients.

Women, you can buy back years of national insurance contributions to make up for gaps in your state pension.

Put it another way. If they have had any time out of the workplace in the past six years, and were not earning any national insurance contributions, they can buy back those years.

This will help them get a bigger state pension.

This is something so simple, and yet many women do not know they can do this. 

All the headlines we read about women having poorer retirement outcomes are terrifying and quite often can end up with us being caught like rabbits in the headlights: we freeze and do nothing.

Of course, doing nothing is the worst option: the best thing is to get independent advice to help save more and make the most of our workplace pensions. 

Yet there is a simple step that many can do to help our financial futures, and that is checking National Insurance records and seeing whether we can buy back some lost years of class 2 voluntary national insurance contributions.

This could help get the maximum possible state pension when the state pension age is reached. (And, actually, men can do this too).

How to do it

Those affected have until April 5 2021 to make up for gaps for the tax year 2014 to 2015. For the next tax year, 2021-22, they can make up for gaps in the tax year 2015-16, and so on.

If they have taken two or three years out from the workplace in order to care for children or for an elderly relative, for example, the government will not have recorded any national insurance contributions against state pension records. 

This is because they were not earning, so were not contributing NI as tax-at-source in their payslip.

As a result of this, the total expected state pension will not be as much as it could be, due to the gaps in NI records. 

They may be able to pay voluntary contributions to fill any gaps if they're eligible.

Simply go online at: https://www.gov.uk/check-national-insurance-record

What if clients are self-employed or affected by changes to the state pension age?

For the purposes of qualifying for NI, the government states you will pay mandatory National Insurance if you’re 16 or over and are either:

  • an employee earning above £183 a week
  • self-employed and making a profit of £6,475 or more a year.

There is a full table available on the government website showing who is eligible. Go to: https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

For those affected by changes to the State Pension Age, they can sometimes pay for gaps from more than six years ago, depending on their age.

This would be categorised as Class 2 NI contributions; again, this can be found on the government website. 

What if clients are out of work?