Mind the (pension) gap

If you've been worrying about gaps in your pension contributions and don't know how to plug them, we're here to help break down all things retirement related and help get you back on track. 

Whether it's your State Pension and National Insurance history, workplace or personal pension, we're here to help guide you through a maze of different terms. And if you’re worrying about gaps in your contributions, we’ve got some tips that could keep your pension pot topped up without wringing out your bank account.

There are many reasons why you might end up with a gap in any pension contributions. We’ll look at a few of the most common ones below:

Breaks in your employment history

Whether it’s short or long term, by choice or not, at some point in your life you may find yourself not working.

Reasons such as being made redundant, taking time out to care for a sick or elderly parent, or travelling for an extended period could all lead to a break from paying any pension contributions.

Maternity, paternity and adoption leave

This type of leave, usually lasting anywhere up to a year for either or both parents, may create a contribution gap too.

And until children start school, it can make financial sense for one parent to go part time or give up work completely instead of paying childcare and nursery fees.

Living and working overseas

Working poolside in a far-flung location? Dipping your toes or diving into opportunities abroad can be thrilling, just try not to splash your laptop.

Working overseas will usually mean a pause on any UK pension contributions, but this isn’t always the case. Remember to check with your pension provider and head to the government’s website for information about the State Pension and working overseas.

You pay into your new State Pension over the course of your working life through your National Insurance (NI) contributions. You’ll usually qualify for a new State Pension if you do this for at least 10 years, and you should get the full amount if you have 35 years on your NI record. You can claim it from the government when you reach State Pension age.

Even if you’ve missed a few years, it doesn’t necessarily mean it’s too late to top things up. You have a window of six years to make voluntary contributions and restore your NI record. You’ll just need to make sure you do this by 5 April each year. You can find out if you qualify for a new State Pension or if you have any gaps in your contribution record on the government’s website.

For the 2024/2025 tax year, the most you’ll get from your new State Pension when you retire is £221.20 a week.

Many people will supplement their new State Pension with a retirement income from their personal or workplace pension. Luckily, it’s a legal requirement for employers to set their staff up with a pension plan. This is known as auto-enrolment. Usually, you’ll pay in a percentage of your pre-taxed wages each month, and so will your employer.

And because you’ll be getting the benefit of your employer’s contributions as well as your own, paying into your workplace pension pot should be high priority.

Let’s debunk the myth that short-term pain is the only way to see long-term gain when it comes to your personal or workplace pension. While hefty contributions and chunky lump sums can boost your retirement funds, don’t underestimate the long-term benefits of starting small and soon.

Think of building up your pension pot like building a house. It won’t all get done in a day, and individual bricks won’t seem to make a big difference. But each one gets you closer to a roof over your head, or in the case of your pension, a comfortable retirement – although of course, saving for your retirement is more of a lifelong project.

You can invest in your future self by getting into good habits now, making manageable and regular pension contributions to get you closer to your retirement goals. And starting sooner rather than later means you can invest in your pension fund for longer, so there’s more time for potential growth.

We’ve written an article with hints on how to give your pension pot a pick-me-up. 

In the middle of a cost of living crisis, keeping up with your personal or workplace pension contributions can quickly fall to the bottom of your list of things to do. But with our Aviva Pension, which is a type of self-invested personal pension (SIPP), you can start saving for your retirement from £25 a month. Although if you have a workplace pension you should consider paying into that first to get the additional benefit of your employer’s contributions.

Our Aviva Pension is more flexible than a yoga class. So even when life throws you a cash-quashing curveball, you can increase, reduce or take a payment holiday whenever you need. And if you want to invest in the planet’s future as well as your own, our SIPP also lets you choose from a range of funds that take environmental and social factors into consideration.

Just remember, all investments can fall as well as rise in value, and you may not get back what’s paid in. Tax rules are subject to change and are dependent on personal circumstances. Tax rules are subject to change and are dependent on personal circumstances. If you’re unsure about the best course of action, it may help to speak to a financial adviser.

You can find out more about our SIPP by heading to our dedicated Aviva Pension page.