State pensioners could be worse off for paying their NI for years (Image: Getty)
A state pensioner has spoken of their regret at paying National Insurance for five decades – because now they’re going to end up with less money in retirement as a result.
There exists a loophole within the UK’s current state pension system whereby a pensioner could end up better off if they had an incomplete National Insurance record, if they were able to claim Pension Credit instead.
The state pension is paid out based on a person’s National Insurance record of contributions. You must have a minimum number of years of paying the tax in order to get a state pension, and you must have at least roughly 35 years’ worth of contributions in order to claim the full state pension. NI contributions are earned by paying the NI tax on your earnings when you work in the UK each year, provided you earn enough to be liable to pay it.
The full state pension, for those who retired after 2016, is currently worth £230.25 per week, but if you had an incomplete NI record (for example, you took time off to raise children, go travelling or work abroad), then you will get less than this full amount.
READ MORE: Full list of 533 conditions that qualify for weekly £187 DWP payment
READ MORE: Anyone with a Cash ISA urged to move money now
However, Pension Credit is a retirement age benefit which can top up your income to almost the same level, but is only available to those who have income below the threshold.
Posting in Facebook group The Epic Retirement Club, one member of the group set out how she’s going to be worse off in her old age specifically because she has paid more into the system.
She said: “I feel as though I am a one off in this group lol! I had to wait until age 66 to retire, I have no savings, no personal pension, I get £230.25 per week [the full new state pension rate] and that’s it.
“Don’t own my own home, am single, so no other income in household. My one regret is paying full N.I. for almost 50 years because if I hadn’t done so I would get less than my pension in which case Pension Credit would make up the shortfall which would mean I still get £230.25 a week [actually £227.10].
“However, those on Pension Credit also get extra bonuses like Cold Weather Payment of £25 whereas I don’t! Unfair to say the least.”
It’s not quite accurate that Pension Credit pays £230.25, it actually pays £227.10 per week, just a few pounds shy of the full new state pension. However, it is true that those on Pension Credit also get access to other benefits, which is why Martin Lewis often calls Pension Credit a ‘gateway’ benefit, as it can in turn entitle you to several other benefits.
So you get almost as much per week as a full state pensioner, but you also do qualify for Cold Weather Payments, worth £25 a week over the winter when the temperature drops, as well as free eyecare and other NHS discounts. Those aged over 75 also get access to a free TV licence.
In order to be eligible for Pension Credit, your income must be less than £227.10 per week, and you also cannot have other income such as a private pension, or too much in savings. Those with £10,000 or more in savings start to have their Pension Credit payments tapered off by £1 a week for every £500 over £10k.
But you don’t need a full National Insurance record to get Pension Credit.
In this way, you could actually be slightly better off in this specific circumstance if you had fewer National Insurance years if you also had no other income or savings, as you would get almost the same state pension income per week, and some other benefits too.
