My client is concerned that he will not have paid enough national insurance to qualify him for the state pension. Briefly what are the rules?
A) In order to get a full basic state pension an individual must have paid sufficient national insurance contributions (NICs) for a minimum number of ‘qualifying years’ in his working life. As NICs cannot be paid in the tax year before the individual reaches the age of 16, or in a tax year after state pension age is achieved, those ages define the period of working life for NIC purposes.
The age at which individuals are entitled to a state pension is gradually increasing. For men born before 6 December 1953, the state pension age is 65 years. For those born after this date the state pension age will increase in tranches, reaching 68 years for those born after 6 April 1977.
For women born after 6 April 1950, the state pension age increases gradually from 60 years until it reaches 65 years for those born between 6 November 1953 and 5 December 1953. From then on, the state pension age for a woman is aligned to that of a man so will eventually reach 68 years for those born after 6 April 1977.
There is a state pension age calculator on the gov.uk website.
It is likely that the increase in state pension age to 68 years will be accelerated in future legislation. It is proposed that the state pension age will be reviewed every five years in order to keep pace with increasing longevity..
Individuals who reach state pension age on or after 6 April 2010 only need 30 qualifying years in their working life to qualify for the full state pension. Men and women who reached the state pension age before 6 April 2010 had to clock-up different numbers of qualifying years: up to 44 years for men and 39 years for women.
A qualifying year is one in which the individual has paid or been credited with Class 1 NICs on earnings at least 52 times the lower earnings limit for the year. The lower earnings limit is £112 per week for 2015/16. Alternatively the equivalent Class 2 or Class 3 NICs may be paid or credited for the year.
Where the taxpayer was self-employed but did not pay Class 2 NICs for any reason, including where the exception for low profits was claimed, that tax year will not be a qualifying year.
Where a taxpayer has paid some Class 1 NICs in the tax year, but not enough to make that year a qualifying year, HMRC will issue a deficiency notice to that individual. Although the deficiency notice invites the taxpayer to pay Class 3 NICs to make the tax year a qualifying year, that payment may not be worthwhile.
The taxpayer may ask for a state pension forecast from The Pension Service, which will identify the number of qualifying years on record and the current value of the estimated state pension based on those years. The taxpayer can request a state pension forecast from The Pensions Service by completing and submitting form BR19.
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