The state of pensions

Although its comparative value is shrinking each year due to its link to inflation rather than average earnings, the State pension still forms the bedrock of many people’s retirement income.

To qualify for a full State pension you need 44 years’ National Insurance contributions (39 for women aged 60 before 2010 – at which point both State retirement ages will be 65). For every year less than this, the amount you receive will reduce incrementally by small percentages until you hit the minimum, 25%, for which you need 11 years’ contributions.

Make up for lost time

Making up missing contributions is possible but expensive. The Inland Revenue should have sent out deficiency notices to anyone who has a contribution gap since 1996. Repairing gaps in 1996 costs £5.95 for every week missed (increasing by between 5p and 10p in subsequent years). The Revenue is accepting deficiency payments until April 2008.

You can find out your entitlement by contacting the Department of Work and Pensions on 0845 300 018 and asking for a State pension forecast.