This is money reader Sue Murtagh trying to get information from DWP about buying top-ups: ‘I’m permanently just sitting in line or getting cut off’
The government has given in to pressure and extended a tight deadline to buy additional state pension supplements after frustrated savers blocked phone lines for weeks.
People seeking to increase their pension payments will now have until July 31 to do so at current rates of up to £824 for each year, and less for a gap year.
This is Money exclusively unveiled the phone freeze last month, and the government said a few days ago it would accept late payments on a case-by-case basis as the Liberal Democrats tried to force an extension to 2025.
Today Treasury Secretary Victoria Atkins said, “We listened to concerned citizens and acted.”
Buying state pension supplements can give a big boost to retirement income if you buy or top up in the right years, and right now the usual six-year term is being extended to 2006/07 – a special deal that was due to expire on 5. April.
It can be difficult to figure out which years will benefit you individually, and the government itself and other money experts warn you that you should contact the Future Pension Center before handing over your money.
Sue Murtagh, pictured above, was one of several This is Money readers who contacted us to complain that she couldn’t reach the Department of Work and Pensions. be pushed back.
Ms Murtagh, a 54-year-old retired bank employee from North Yorkshire, wanted to know whether buying six-year top-ups at a cost of around £4,700 would improve her state pension.
“I’ve been trying to get someone on the phone for a few weeks now and after going through the quite laborious automated phone system at the Future Pensions Center I’m permanently in line or cut off,” she told us.
“It is especially nice that people can continue to top up at the current rates and do not have to pay the increased rates for voluntary contributions that will take effect from April.
Steve Webb, this is Money’s retirement columnist
“It’s so frustrating to get all the way through and then suddenly hear a busy signal!”
On hearing of the new deadline, Ms Murtagh said: ‘I am delighted to hear that the DWP has acknowledged the delays in this important service and the concerns people have in ensuring their pensions are fully funded.
“Extension is a very sensible option and I look forward to contacting a DWP representative soon.”
Nicola Foote, 65, a retired actuary from the north of England, emailed us after trying unsuccessfully to find out if it was worth buying an extra two years to increase her state pension.
‘I have already topped up my NI premiums. This took forever and contained a lot of imprecise information that, despite being an actuary, was difficult to decipher,” she said.
“Since I’ve had dues for 38 years, I don’t understand if I really have to pay for two missing years, and if I’ve in fact already paid too much in terms of additions.
‘I called many times, transferred a few times, and the connection was disconnected pretty quickly. I have made two formal complaints.’
Following news that the deadline would be postponed, Ms Foote added: ‘The extension is a start, but probably nowhere near long enough judging by my experience of making upgrades in the past.
‘There are practical matters such as obtaining a reference number with the payment; things may have changed, but still some advice on how to actually do the upgrade would be helpful.”
Steve Webb, former pensions minister and now a partner at LCP, had also asked for an extension after his This is Money column inboxes were filled with complaints.
Does buying supplements boost YOUR AOW and what does it cost?
Buying a supplement to increase your state pension can be very cost effective.
A year of voluntary ‘Class 3’ National Insurance contributions typically costs £824.20, and if you fill gaps in a year in which you have already made some NI contributions it will be less.
“In many cases, this increases entitlement to state pension by 1/35th the standard rate, or about £275 a year,” says Steve Webb, who has developed a tool here to help people with top-ups.
“This means that someone who tops up with one year will get their money back within four years after taking out their pension, even taking into account the base tax.”
Webb says someone receiving a state pension for 20 years will get back £4,400 (excluding base tax) for an initial outlay of £824.20.
But he warns that filling in blanks for certain years – especially those before 2016/17 – can sometimes have no impact on your state pension, especially if you were outsourced and already paid 30 years in April 2016.
“I am delighted that the government has listened to our concerns and has extended the deadline for people to top up their state pensions,” he said today.
“It is especially nice that people can continue to top up at the current rate and do not have to pay the increased rates for voluntary contributions that will take effect from April.
“For most people with a state pension gap, topping up can be excellent value, and this extended period means more people can do the right checks and top up with confidence.”
Liberal Democrat Work and Pensions spokeswoman Wendy Chamberlain, who had called for the deadline to be extended to 2025, said: ‘While we are pleased to see that the government has listened to our concerns and given people longer to seek help, worry.
“An extra two months is simply not long enough for retirees and future retirees to get the advice they need.
“It is sheer negligence on the part of ministers to run the risk that hundreds of thousands of pensioners will be without a full state pension through no fault of their own.”
“Ministers should once again listen to the Liberal Democrats with an urgent extension of the deadline by two years and a fully equipped Future Pension Center helpline to ensure that all concerned have access to the advice they need.”
HMRC said today it had given taxpayers more time to pay voluntary national insurance contributions ‘after members of the public raised concerns about the previous deadline of 5 April 2023’.
It said: ‘Anyone with gaps in their National Insurance record from April 2006 now has more time to decide whether to fill the gaps to increase their new state pension. Any payments will be made at the lower rates for the 2022 to 2023 tax year.
As part of the transitional arrangement to the new state pension, taxpayers were able to make voluntary contributions for incomplete years into their national insurance schemes between April 2006 and April 2016, to help increase the amount they receive when they retire.
“And after an increase in customer contact, the government has extended the deadline to ensure that people have time to contribute.”
What do pension experts say?
Tom Selby, head of pension policy at AJ Bell, said: ‘Extending the deadline for Britons to pay voluntary national insurance contributions to increase their entitlement to state pensions is a pragmatic and welcome move by the government.
“Thousands of people benefiting from transitional measures introduced as part of reforms introduced in 2016 could increase their state pension income by hundreds of pounds a year.
‘However, with the original deadline less than a month away, an increase in calls to HMRC led to a real risk of people being caught in a phone blackout and missing out as a result.
That would have been a PR disaster for the DWP and inevitably led to claims for damages.
“If you’re considering paying voluntary NI, it’s vital that you think carefully about the decision because while it will be a smart move for some, it won’t benefit everyone.”
Jon Greer, head of pension policy at Quilter, said: ‘It is commendable that the government has listened to public and industry concerns and extended this golden opportunity for people to fill gaps in their state insurance and supplement their state pensions. . .
“Hopefully an extra three months means people who may have struggled to get through to the DWP and HMRC to upgrade can now try again and take advantage of what is a fantastic opportunity for people to increase their retirement income.
“It also gives others more time to decide to save and take advantage of these contributions.”
How much is the state pension?
The basic pension is currently £141.85 per week, or approximately £7,400 per annum. It is supplemented by additional AOW entitlements – S2P and Serps – if accrued during working years.
The two-tier government system was replaced in 2016 by a new ‘flat-rate’ state pension. This is currently worth £185.15 a week or about £9,600 a year.
Both amounts rise by 10.1 per cent in April – the old state pension to £156.20 and the new to £203.85.
People who have been outsourced to S2P and Serps over the years and retire after April 2016 will receive less than the full new state pension.
Employees had to have 30 years of National Insurance contributions to get the old state pension, but they now have to have paid 35 years of contributions to get the new flat-rate state pension.
But even if you’ve paid in full for 35 years, it could still be less if you outsource the contract for several years.
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