How can I increase my Basic State Pension (BSP)?
Basic State Pension (BSP) is a flat-rate pension whose amount is established by the government every year. This means that each person who has built up at least 30 qualifying years will receive the same amount of State Pension. In other words, your BSP does not depend on the amount of the National Insurance Contribution you have paid or been credited with. It also does not matter if you have more than 30 qualifying years.
Nevertheless, you can top up your NICs record if you do not have full 30 qualifying years by making one-off voluntary payment (voluntary Class 3 National Insurance Contributions) for missing years. You can top up your NICs record while working or even after reaching State Pension Age (SPA). If you want to do so, you must pay the voluntary contribution within 6 years of the end of the tax year for which you intend to pay NIC. You can also make the voluntary contribution in the current year by paying a one-off payment or the weekly rate of £12.05 (Class 3 voluntary contribution) or the weekly rate of £2.40 (Class 2 voluntary contribution) if you are self-employed.
The current time limits for paying voluntary Class 3 National Insurance Contributions (Class 3 NIC) are as follows:
|Missing tax year in NICs record||Voluntary Class 3 NICs must be paid by:|
|2004-05||5 April 2011|
|2005-06||5 April 2012|
|2006-07||5 April 2013|
|2007-08||5 April 2014|
|2008-09||5 April 2015|
|2009-10||5 April 2016|
Buying additional qualifying years is highly recommended for:
- Women who gave up work in the 1970 to look after children, since they were not credited with NIC for this time
- People who were working abroad for a period of time
- Spouses or unmarried partners if one of them has to pay a considerable Income Tax on his or her pension income. Buying extra qualifying years for other spouse or partner means that the couple will receive not only extra but also tax-free pension
If you top up your entitlement to basic State Pension (BSP), you actually buy pension worth thousands of pounds at a bargain price compared to any private insurance premium. What is more, your pension is tax-free. There is no doubt that buying extra years of basic State Pension (BSP) is one of the most profitable pension deals on the market.
You can also improve your basic State Pension using your spouse’s or civil partner’s National Insurance Contribution record. It is possible if all of the following conditions have been met:
- You are married or in a civil partnership
- You are not entitled to a full basic State Pension (BSP) on the basis of your own NIC record
- Your spouse or civil partner was born on or after 6 April 1950
- Your spouse or civil partner is entitled to some basic State Pension (BSP)
- You are both over your State Pension Age (SPA)
The amount of the State Pension you can get entirely depends on your spouse’s or civil partner’s NIC record. However, you can not receive more than 60 per cent of the full basic State Pension (BSP). In 2010-11, 60 per cent of the full basic State Pension amounts to £58.50 a week.
The above rules apply to both married women and men. You do not have to live with your spouse or civil partner to use his or her NIC record to increase your BSP. You do not even have to wait until your spouse or civil partner starts claiming his or her basic State Pension (BSP).
If you intend to top up your NIC record or you want to improve your basic State Pension by using your spouse’s NIC record, you should contact Capital Business Links Ltd as soon as possible. Our experts will advise you on all financial and tax aspects of your plans. For more information about our service for pensioners or to arrange a meeting with one of our consultants, please contact us on telephone number 0208 567 99 44 or at our e-mail address.