Mind the (NI) gap
Letters. HMRC recently began issuing letters to those who have a gap in their NI for the year 2008/9. The idea is to alert those who might have a shortfall that could affect the amount of state pension they’ll receive and to tell them what they can do about it.
Trap. Even a gap of only one week in your NI record for a particular year means that the whole year won’t count towards your state pension. You need 30 full years of NI to get the full basic state pension, so the loss of a year can mean the loss of one 30th of your pension rights. That’s worth just under £100 per year for life at current rates.
Top up. The Taxman will offer you a chance to top up your NI record by paying voluntary contributions at the rate of £12.05 for each week that there’s a gap (see The next step). But it’s not always necessary.
Tip. Don’t waste money topping up your NI unless there’s a danger that you won’t make 30 years’ full NI contributions. HMRC is sending letters to those 35 and over, but even at that age you could have up to 19 years’ worth of contributions under your belt, meaning that you’ve over 30 years of working life left in which to pay another eleven years’ contributions.
For a link on how to make voluntary contributions, visit http://tax.indicator.co.uk (TX 11.02.08).
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