State pension savers urged to take action or lose £5,400 after HMRC error

A number of workers may miss out on £5,400 of state pension cash because of an HMRC error, as thousands are urged to take action. Some self-employed workers could lose out because HMRC may have wrongly refunded their Class 2 National Insurance contributions.

Class 2 National Insurance contributions have now been scrapped. They were previously a flat-rate £3.45 charge paid by self-employed workers. By refunding the contributions, HMRC left savers' records looking as though they had not paid in for that financial year.

Missing National Insurance contributions can reduce your state pension allowance while also affecting your entitlement to other benefits.

To be eligible for a full state pension of £11,973 a year, you need 35 years of National Insurance credits.

Missing one year of contributions would leave someone £342 worse off, Tom Selby, director of public policy at AJ Bell, said.

That means someone who lives until 82 would be £5,472 worse off overall.

Steve Webb, partner at pension consultants LCP and former pensions minister, is urging self-employed savers to check their records

He said: "It is vitally important that people keep track of their National Insurance record.

"Even where it is not mandatory to pay contributions, it can be advantageous to make voluntary contributions to help boost your state pension prospects.

"It is worrying if HMRC are routinely refunding such payments, and they need to review their processes to avoid the risk that in doing so they are damaging people's retirement prospects."

An HMRC spokesperson said: "We're sorry to those affected and are working hard to resolve the issue."