Millions could turn £800 into £5,000 by checking this simple detail

The Department for Work and Pensions (DWP) is encouraging everyone aged between 45 and 70 to check this simple detail in order to boost their statepension. The tip could help you turn £800 into £5,000, however the rules are changing in April so any amendments need to be done before then.

National Insurance contributions are part of the taxes you pay to build entitlement to a state pension and you need to have paid 35 full years of contributions to qualify for the full state pension. If you have any gaps in your record because you were unemployed, self-employed or on a low income then you won’t get the full state pension.

How to check

It’s possible to see how many full years of contributions to National Insurance you have made by going to the gov.uk website. If you have any gaps in your history it is possible to make a voluntary contribution, which generally costs around £800 per year. Whilst this may seem a lot to put in, it will work out in your favour in the long run. Financial Times consumer editor, Claer Barret, commented, as per MyLondon:

That £800 investment could bring you thousands in years to come. But the rules change in April, and you can only fill gaps going back six years from then. So it's really important to look now before April.

As it stands, you can go back to 2006 and top up any missing years but in April a six-year limit will be implemented so if you don’t top them up now, you will have missed your chance.

How it works

National Insurance contributions usually will have been taken directly from your wages if you're employed or via self-assessment if self-employed. If you want to make a voluntary contribution though you need to get a pension forecast and speak to the Government's Future Pension Centre and they will be able to advise whether it is worth paying for extra qualifying years.

The cost of buying back years is £15.85 a week which means it costs £824.20 to buy one year of contributions. Doing this however, will add £275 to your state pension every year. Taking this calculations into account Martin Lewis has this to say, as per Money Saving Expert:

So the breakeven point is three years. So if you live three years beyond state pension age, or if you're already at state pension age and three years beyond the point that you get this, you're quids in.

It is also worth noting that gaps in your contributions can be made up by claiming credits instead. Thousands are thought to be missing out on NI Credits and you can find out on gov.uk if you are one of them.

Sources used:

- MyLondon 'DWP: Millions face missing out on £5,000 payment if they forgot to do one simple thing'

- Money Saving Expert 'Martin Lewis: Aged 45 to 70? Check if you can turn £800 into £5,500 by paying to boost your state pension'