What happens to my pension whilst I’m in prison?
Retirement pension is suspended when you go to prison. This means that you won’t actually receive any pension payments whilst you are in custody. If you have been held on remand but are not convicted of a criminal offence, you will receive all your pension back payments in a lump sum when you are released. If you are convicted, you lose your rights to a retirement pension until you are released.
You should be able to start a claim for state pension or pension credit just before leaving prison. However, payments will not commence until the Pension Service has received a ‘Notification of Discharge from Prison’ (Form B79).
Will my pension entitlement be affected by being in prison?
While you are in prison and not working or claiming benefits, your National Insurance Contributions will stop. This means that when you come to claim some benefits (i.e. State Retirement Pension), you may not be entitled to the full amount. Some people choose to pay voluntary contributions to plug the gap. However, you will need to consider carefully whether you need to top up. It may not always be right or beneficial for you to pay additional contributions as your entitlement to State Pension depends on how much you’ve already contributed and the date you reach State Pension age.
The amount of basic State Pension you are entitled to is based on your National Insurance Contributions record over your working life from age 16 until State Pension age. Your record comprises National Insurance Contributions paid or credited to you in each tax year. A minimum amount of contributions or credits is required for a year to count as a ‘qualifying year’ towards your overall contributions record.
Qualifying years needed for entitlement to the full basic State Pension
How do I know if I have a gap in my National Insurance Contributions record?
‘Gap in your National Insurance record’ letter – If you reach State Pension age before 6 April 2016 you may have received a letter from HM Revenue & Customs (HMRC) telling you that there is a gap in your record. The letter isn’t a bill – but it will tell you how much you can pay if you want to fill the gap and how you can pay if you opt to do so.
State Pension Statement – The Department for Works and Pensions Future Pension Centre can provide you with a State Pension Statement that will give you an estimate of your State Pension based on current rules. Once you have this you can also tell whether there are any gaps in your National Insurance Contributions Record.
Statement of your National Insurance account – You can ask HMRC for a Statement of your National Insurance account. It will tell you how much, if anything, your gap is, whether you are able to make up that gap, and how you can pay if you wish to do so.
Deadlines for making up National Insurance Contribution gaps
You usually have to make up the gaps within six years of the end of the tax year for which the National Insurance contributions are being paid. However, there are extended time limits for some tax years and special rules if you reach State Pension age either between 6 April 2008 and 5 April 2015 or after 6 April 2016.
When you’re in prison, either on remand or convicted, you are not liable for any National Insurance Contributions and you will not receive any National Insurance credits.
National Insurance contributions – With the exception of those at the end of their sentence and working outside of the prison, prisoners are not liable to pay NI contributions. They can however make voluntary contributions towards their State Pension. Voluntary contributions can be paid up to six years after the tax year in which you were released from prison. If you were self-employed before your custodial sentence, you can continue to voluntarily pay Class 2 contributions.
National Insurance credits – These can be awarded to individuals who are incapacitated and unemployed and regarded as being temporarily out of work. This does not apply to convicted prisoners. This means that, if you do not voluntarily pay contributions after leaving prison to cover any shortfall to your NI contributions, you may receive a reduced State Pension in the future.
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