Martin Lewis: Expert talks about National Insurance credits
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National Insurance contributions affect a lot more than the amount of state pension one can receive when they reach state pension age. Some benefits, like Jobseeker’s Allowance, require a certain amount of contributions before Britons can be eligible for the financial support.
Chancellor Rishi Sunak announced in the Spring Statement that the National Insurance threshold will increase to £12,570.
From June, this means people earning less than £12,570 will not need to pay National Insurance contributions.
While this has the potentially to greatly lower the tax burden on low income families, it will also impact their eligibility for contributory benefits like state pension.
Additionally, the National Insurance rate hike of 1.25 percent has been implemented in April, meaning even the low earners that should be assisted with the threshold will still have to pay the increased rate for a few months.
People applying for benefits generally have to give their National Insurance number on the application regardless of what benefit they are applying for.
For non means-tested benefits like PIP, contributions won’t affect the rate one receives as it is based purely on their needs.
Other benefits may take into account one’s income and savings, like Universal Credit, which will affect their eligibility.
However, a separate category known as contributory benefits rely on National Insurance contributions as their main eligibility requirement.
- Maternity Allowance
- Contribution-based/New Style Jobseeker’s Allowance
- Contribution-based/New Style Employment and Support Allowance
- Bereavement Benefits
- Basic state pension
- New state pension.
Each benefit has a different amount of contribution requirements and may require certain classes of contributions.
If someone applies for one of these benefits but is refused on the basis that they have not paid enough National Insurance, they can check their NI record on the Government website.
Britons that have paid more National Insurance than they believe is reflected on their record can contact the National Insurance Contributions Office.
Additionally, Britons might find they have not been paying the right type of National Insurance to claim one of these benefits.
People in certain circumstances or claiming specific benefits should check if they can claim National Insurance credits to build up their record.
This is usually available to parents, carers or those actively seeking employment.
Britons concerned that they may not have enough National Insurance contributions to get a reasonable amount of state pension could use voluntary contributions to top up.
Voluntary contributions, also known as class three credits, are roughly £800 for a single year of state pension.
These contributions, however, do not always increase a state pension, so it is worth checking with the Pension Service.
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