People across the UK claiming the State Pension have been warned that their payments could be impacted starting next week.
Starting July 6, the National Insurance threshold is expected to rise by £2,690. UK Chancellor of the Exchequer Rishi Sunak confirmed that threshold for the main rate of National Insurance will soar from £9,880 to £12,570.
The National Insurance threshold refers to the amount of income you earn that will not have National Insurance deducted from it. According to the UK Government, the change will help approximately 30 million, and will result in tax savings of around £330 per year.
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As reported by the Daily Express, the increase is being introduced after the UK Government faced backlash for increasing National Insurance payments by 1.25 per cent earlier in the year. The Chancellor has hailed it as the single largest tax cut in a decade, stating that "around 70 percent of all workers will have their taxes cut by more than the amount they'll pay through the new levy"".
Those who earn the lowest income at all will not need to pay any National Insurance. However, senior pensions and retirement analyst at Hargreaves Lansdown Helen Morrissey has warned that workers earning under £12,570 a year may lose access to crucial National Insurance credits for their State Pension as a result.
Morrissey stated: “Ordinarily a worker should receive a National Insurance credit even if they earn below the threshold as long as they have earnings of more than £120 per week or £6,240 per year but it’s worth checking to make sure this is the case.
“The State Pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, which means they end up with less in retirement."
She continued: "It is vital people worried they may no longer be getting National Insurance credits check to see what benefits they are entitled to, so these credits can be made.
“A further option for people looking to plug gaps in their state pension record is to buy voluntary National Insurance credits."
Purchasing a year's worth of voluntary National Insurance credits will cost you approximately £825, and will in turn provide you with 1/35th of your entitlement. During the course of retirement, this can be a very cost-effective way of boosting your income. Others may be eligible for credits to improve their National Insurance record.
The State Pension can only be claimed once somebody reaches the required age, which is currently 66 for both men and women. The amount you receive is dependent on how long you have been in work and how much National Insurance you have paid over your lifetime.
To qualify for the minimum sum, you will need to have at least 10 years of National Insurance contributions. To get the maximum amount, meanwhile, you will need to been in work for at least 35 years.
National Insurance credits can help fill in gaps in your National Insurance record, to make sure you qualify for certain benefits including the State Pension. You may be able to get National Insurance credits if you’re not paying National Insurance, for example when you’re claiming benefits because you’re ill or unemployed.
You should get automatic National Insurance credits if you claim any of the following benefits:
- Universal Credit
- Jobseekers Allowance
- Employment and Support Allowance
- Maternity Allowance
- Child Benefit
- Carer's Allowance
- Income Support
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