Most people are happy to assume that each year the deduction of tax and national insurance from earnings is helping to build up their entitlement to a state pension. However, it has been revealed that of the 50 million payroll returns received by the HM Revenue & Customs each year around 4% contain incomplete or incorrect information.
These 2 million taxpayers have lost out on future state benefits.
These errors occur year on year and we are now faced with 118 million separate contributions unallocated to taxpayers because no National Insurance number can be traced.
So how can I check I am not one of these taxpayers?
The simplest option is ask the pension service for a pension forecast – this can be obtained online from https://secure.thepensionservice.gov.uk/statepensionforecast/
A State Pension forecast gives you an estimate of your basic State Pension and additional State Pension (also called the State Second Pension and formerly known as the State Earnings-Related Pension Scheme (SERPS))
More importantly your forecast will give you your current number of qualifying years (the number of years you have paid or been credited with National Insurance (NI) contributions). If this number is not equal to the number of years you have been in paid work (including years you have been caring for children or other qualifying dependants as these also count towards future state benefits) then you may miss out on future benefits to which you are entitled.
Can I leave this until I near retirement
Yes. But it will be far more difficult to reconcile your entire job history if you need to go back a possible 40+ years.
Instead, if you have not already done so we would recommend you obtain a forecast now, and to review this every 5 to 10 years.
We will be reviewing what these qualifying years mean and how you get a full state pension in a later note.