Martin Lewis has shared a valuable tip on how individuals in the UK might be able to increase their state pensions significantly. Time is of the essence, as the deadline for this opportunity is rapidly approaching.
During his recent appearance on an ITV show, the finance expert, who hails from Manchester and is 52 years old, emphasized the importance of “boosting your state pension” by purchasing National Insurance (NI) years. He highlighted this as a financially rewarding option for many individuals.
The urgency stems from the looming April 5 deadline. Once this date passes, individuals will no longer be able to retroactively claim for years preceding 2019. Martin cautioned that missing this deadline could result in people losing out on considerable sums of money.
The change is due to the ‘new’ state pension, which was introduced in 2016 and applies to men born after April 5, 1951, and women born after April 5, 1953.
While the Government introduced the change in 2016, ‘transitional agreements’ were in place, which let people buy missing NI back to 2006. However, the transition ends this tax year and will revert to the standard rule, allowing citizens to buy back for just six years from the current date.
‘After April 5 it reverts,’ Martin explained, adding that the rush he’s creating by outlining the issue on live television has ‘probably crashed the government’s website’.
He added: ‘There are 13 years you are going to lose access to… that is massive because one year is worth about £330 a year on top of your state pension’.
The expert used his popular ITV show to explain steps viewers should follow to check if they should buy back NI years, saying, ‘I have five steps to show you and it’s worth doing’.
Martin explained that citizens need at least ten qualifying NI years to receive some state pension. From there onwards, the pay outs get bigger, and after approximately 35 NI years, citizens can get the full state pension.
However, many are missing past NI years for reasons such as low incomes, career breaks, years abroad, or not claiming credits.
‘Many people are missing past NI year dues to having low income… or having career breaks, or not claiming correctly, that can be worth tens of thousands of pounds,’ he said.
People can currently buy back the missing years up to 2006, but they must act before the rules change.
To assess whether buying NI years back is relevant to viewers, Martin shared his five-step plan, which is also outlined in detail and with relevant links on his website.
The first of five steps saw Martin advise viewers to check whether they are missing National Insurance years and to see if they’re on track to get the full state pension.
Next, Martin outlined his second step, which involved viewers checking if they can get NI years for free because, while most are auto added, that isn’t always the case.
The main instances of free NI years include individuals who didn’t claim Child Benefit or the wrong partner did, who have family members providing childcare or those who didn’t claim their entitled Carer’s Credit.
If missing an NI year from 2006 to 2018, individuals must decide whether it’s worth buying, which depends on whether they are on track to get the full forecast, the cost of those years, and their age.
If relevant, exploring the option of buying a year – the fourth step – costs around £800, though many will only need to pay for a partial year.
The final step includes an important safety check to ensure the move is right for the individual who believes buying NI is the correct decision.
The expert told viewers they could complete the safety check via phone or email, depending on the circumstances.
It comes after Martin Lewis issued an urgent warning to British couples who could be missing out on a £1,260 tax break.
The Manchester-born finance guru revealed the tip to excited viewers on an episode of The Martin Lewis Money Show.
According to the money man, married couples or those in a civil partnership – provided one partner was born after April 5 1935 – could be eligible to earn £252 each tax year.
Perhaps even more thrilling is that you can backdate your claim by up to four years, resulting in an astounding £,1260 total gain.
To be eligible, one partner must be a non tax payer, while the other should be paying the basic 20 per cent tax from their salary.
To apply for the ‘Marriage Allowance’, the non tax payer must head to gov.uk and fill out an application form.
There is however one nagging thing – you’ve got to apply before the end of the tax year which cuts off on April 5.
In a snippet captured on X, Martin explained: ‘It works provided one of you is aged under around 90. Specifically one of you needs to have been born under the 5th of April 1935’ he said.
He then broke down important details such as each person’s ‘personal allowance’ and the set income needed to be eligible.
A personal allowance is the amount you are permitted to earn per year without having to pay tax. Most people have a yearly personal allowance of £12,570.
‘One of you needs to be a non-tax payer, so you are not earning your full personal allowance you can earn before you start paying tax on it’ said Martin.
For those who work part-time or volunteer, the TV host ensured they could still be eligible as long as ‘you don’t pay income tax’.
‘The other [partner] needs to be paying the highest rate of tax they pay – the basic 20 per cent rate of tax’ he explained.
‘Then what happens is this… each of you have your £12,570 personal allowance – that’s the amount you can earn that you don’t pay tax on each year’.
He revealed the next step was crucial to gaining the tax break, and advised watchers to take note.
‘So the non tax payer can apply to gov.uk to move 10 per cent of their tax free allowance across to the basic rate tax payer’.
This would reduce the non taxpayer’s personal allowance to £11,310, while increasing the tax payer’s combined tax-free allowance to £13,830.
This extends their personal tax-free allowance from £12,570 to £13,830, thus reducing the overall amount they will pay have to pay income tax on for the year.
‘Remember they would have paid tax on it at 20 per cent’ he added.
‘So the gain there is £252 a year’. And pointing to an explanatory diagram, he said ‘as long as the person on this side [the basic tax payer] is earning over £13,830, you’re always going to be net up if there’s a non tax payer and a taxpayer’.
He then delighted viewers with the news that eligible couples could backdate claims to the past four years, meaning they could gain a whopping £1,260 from a total of five tax years.
The major update could affect as many as 2.1 million couples, who Martin warned should fill in application forms ‘quickly’.
