State pension mistake that could cost you £328 a year – expert | Personal Finance | Finance

State pensioners could be missing out on £328 a year by not being on the full amount they could claim, an expert has warned.

A person typically needs 35 years of National Insurance contributions to get the full new state pension, which has just increased to £221.20 a week.

Steven Cameron, pensions director at wealth firm Aegon, said missing even just one year of contributions can “quickly add up” to a sizeable chunk missing from a person’s payments.

He explained: “The way that you work out how much you’re missing out on is if you’ve got 34 years rather than 35 years, then you get 34 35ths of the state pension, you’ll lose one 35th.

“The full new state pension for 2024/2025 is £221.20 a week, so for every year that you fall short, you’ll miss out on £6.32 a week. So if you were 10 years short, you would lose £63.20 a week.”

A person on the new state pension missing just one year of contributions would miss out on £328.64, or £6,572.80 over 20 years.

But in reality they would lose out on even more, as the state pension increases each year. Mr Cameron said: “The extra you get will go up each year in line with the state pension triple lock.

“So if you’re looking at the figures, you should bear in mind that if you’re buying an extra £6.32 a week, that will go up in line with inflation or earnings, whichever is higher.”

The triple lock ensures the state pension goes up each April in line with the highest of inflation, the rise in average earnings or 2.5 percent.

Mr Cameron warned that people may underestimate how much more state pension they could get as they don’t realise how long they would receive the extra cash.

He said: “Plugging the gap involves you paying a lump sum now in return for a higher income for the rest of your life.

“It can be difficult for anyone to judge if that’s worthwhile doing. People quite often underestimate their life expectancy so they might think, I won’t live 20 years after my state pension kicks in so it’s not worthwhile.

“But nowadays with longer life expectancy, people can live well into their 80s and 90s.

“So making a one off payment now for a boost to your income for life can be a better deal than it perhaps looks to some people.”

The rates for paying voluntary National Insurance contributions are currently £3.45 a week for Class 2 contributions, or £179.40 for a full year, and £17.45 for Class 3 contributions, or £907.40 for a full year.

Before you make the payment, it’s important to first check that your state pension entitlement will increase by paying for extra contributions, as this may not be the case.

You can check if you have any gaps in your National Insurance record here and can check how much state pension you are on track to receive with the state pension forecast tool.

To find out if you would increase your payments by topping up, those who are yet to reach state pension should call the Future Pension Centre on 0800 731 0175.

People of state pension age who want to check should call the Pension Service on 0800 731 0469.

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