National Insurance threshold warning as the rise could impact your state pension

Peter Komolafe suggests buying National Insurance credits

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Starting from July 6, the threshold will increase by £2,690. Mr Sunak confirmed that the primary threshold for the main rate of National Insurance will jump from £9,880 to £12,570. According to the Government, this tax change will benefit around 30 million people, resulting in an overall tax saving of around £330 a year.

By lifting the threshold, these workers could lose access to vital National Insurance credits for their state pension.

Ms Morrissey explained: “Ordinarily a worker should receive a National Insurance credit even if they earn below the threshold as long as they have earnings of more than £120 per week or £6,240 per year but it’s worth checking to make sure this is the case.

“The state pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, which means they end up with less in retirement.”

There are many benefits that come with automatic National Insurance credits.

This includes benefits such as 

  • Child Benefit
  • Universal Credit
  • Jobseekers Allowance

However there are some benefits that will only give credit if they are applied for, such as Statutory Sick Pay (SSP).

Ms Morrissey continued: “It is vital people worried they may no longer be getting National Insurance credits check to see what benefits they are entitled to, so these credits can be made.

“A further option for people looking to plug gaps in their state pension record is to buy voluntary National Insurance credits.”

Buying a full extra year costs around £825 and will give someone  1/35th of their entitlement.

Over the course of retirement, this can be a very good way of boosting one’s state pension payments – while others will be eligible for credits to improve their National Insurance record.

State pension payments can be claimed once someone turns state pension age, which is currently 66.

How much someone gets depends on how long they’ve worked and how much National Insurance they’ve paid over their life.

People will need to have 10 years of National Insurance contributions to get any money at all.

To get the maximum amount of the new state pension, Britons need to have worked for at least 35 years and collected National Insurance credits.

People usually need a total of 30 qualifying years of National Insurance contributions or credits to get the full basic state pension.

But people can fill in the gaps by making voluntary contributions if they don’t have enough.

The full new state pension is £185.15 a week.

Britons should get automatic National Insurance credits if they receive the following benefits:

  • Universal Credit
  • Jobseekers Allowance
  • Employment and Support Allowance
  • Maternity Allowance
  • Child Benefit
  • Carer’s Allowance
  • Income Support

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