Under the new UK state pension system introduced on 6 April 2016, people who spent most of their working life in the public sector or working for private companies, whose occupational pensions were “contracted out” of part of the state pension system, are entitled to top up their state pension at a heavily discounted rate.
If your state pension is significantly lower than the full “flat rate” figure of £159.55 per week it could make financial sense to pay voluntary National Insurance contributions for the years from 2016/17 until retirement age. If you have spare cash, this may allow you to increase your state pension at a subsidised rate with an excellent return on your investment.
The full UK state pension rate of £159.55, as of today, is for those with 35 years of contributions.
For those of you not yet retired and whose state pension age falls after April 6, 2016, the cost to “buy” a missing year in your National Insurance record is currently a maximum of £741 (for tax year 2017-18).
One extra year of contributions adds 1/35th of the full pension rate of £159.55 to your entitlement, equivalent to about £4.56 per week or £237 per year.
In other words, a one-off lump sum of £741 paid for 2017-18 would buy you an increased pension of £237 per year, kicking in at state pension age and lasting for the whole of your retirement. Given that a typical retirement period is around 20 years, the maths is easy to do.
To verify the gaps in your contributions you need to check your UK National Insurance Record by registering for a Government Gateway account in order to obtain a Gateway User ID.
Once you have this ID you will be able to check the number of qualifying years, obtain a state pension forecast as well as information on making voluntary contributions to cover any shortfalls.
We would also strongly recommend you review all your existing personal pension arrangements in order to ensure your retirement needs are being managed tax effectively while in Italy.
