Martin Lewis reveals how Britons ‘aged 45 to 70’ can turn £800 into £5,500 by paying to increase their state pension
Consumer champion Martin Lewis has shared tips on how to turn £800 into £5,500.
The Money Saving Expert told his BBC Sounds podcast listeners about a pension hack, but warns that opportunity expires in April.
During his weekly podcast, 50-year-old Martin made an urgent appeal to everyone between the ages of 45 and 70 to ‘act quickly’ in increasing their state pension; this costs £800 but would give an average return of £5,500.
The finance guru advised everyone to take note of his advice and help spread the word for anyone affected by the changes made from 2016, with certain schemes set to expire in April next year.
Martin Lewis, 50, (pictured) has shared tips on how to turn £800 into £5,500. The Money Saving Expert talked about pension pots on his BBC Sounds Podcast
During the 45-minute podcast, Martin said, “If you’re between the ages of 45 and 70, you should now see if you can increase your state pension.
“Now I say 45 to 70, that’s because 45 is the youngest I think it could work with, but in reality it’s more likely to apply to people 55 to 70.”
The Spaarexpert explained that they introduced the new state pension on April 6, 2016.
For those who reach the state pension age after that date, everyone who is not yet 70 years old, has been put on the new state pension age.
The Money Saving Expert (pictured) told his BBC Sounds podcast listeners about a pension hack, but warns that the opportunity will expire in April
Martin said: “Transitional arrangements have been made as part of that. Those arrangements end this tax year on April 5, 2023, which is why what I’m about to say is in a hurry.
‘This concerns your national insurance years, because the amount of your AOW benefit is based on the number of qualifying national insurance years you have.
‘You can earn years working and you have to earn more than £123, so minimum wage for a minimum number of hours per job.
‘If you don’t work, you can get national insurance contributions in other ways, for example if you raise children or have a disability.’
He explained that it takes you about 35 years to get a full state pension when you retire.
Martin then gave advice to help everyone reach the maximum number of years, and encouraged those who have not yet reached state pension age to look up their state pension statement on Gov.uk.
And for those who are already of state pension age to check their record with the national insurances, which states how many years of full contributions you have and whether you have any gaps in your file.
Martin then revealed that you can buy missed years to get a bigger retirement pot.
“You can buy more years and this is the crucial part and why timing is so important now. Until April 2023 you can buy back national insurance years up to and including 2006,’ he says.
‘After April 2023 you can only go back six years. So as you can see there is a significant number of years if you miss them you only have a short time left to buy them.
‘A voluntary national insurance year costs around £800 – but it adds £275 a year to your state pension, meaning if you’re only three years past state pension age or if you’re already at state pension age, after purchasing the extra years then you are even.
“A man who reaches the age of 66 would normally live another 19 years. If that were to happen, every £800 you paid would be an extra £5,300 on your state pension.
‘A woman who turns 66 would normally live another 21 years, so every £800 paid would be an extra £5,800 on your state pension.’
But before you start paying for missed years, Martin said it’s important to check if you’re entitled to free NI credits, which you can check on the Gov.uk website.
The finance guru also spoke on topics such as the cost of living crisis, whether dehumidifiers are a cost-effective way to dry clothes and whether it is cheaper to use an air fryer than a microwave.