Martin Lewis issues state pension warning as HMRC error could leave 800,000 Britons underpaid

Martin Lewis has issued a state pension warning after an HMRC error was found to have affected up to 800,000 self-employed workers.

Those with gaps in their National Insurance record could miss out on thousands of pounds in retirement if the issue is not corrected.

The problem affects people who registered as self-employed between 2015 and 2024. When signing up for Self Assessment, many did not complete the separate CWF1 form needed to notify HMRC of their self-employed status.

As a result, some workers were not correctly registered to pay Class 2 National Insurance contributions, which count towards their State Pension entitlement.

While most self-employed people were allocated the correct National Insurance contributions, a significant number were not, leaving gaps in their records.

Anyone with missing qualifying years who is not on course for the full state pension could lose out on thousands of pounds over the course of their retirement.

"The whole State Pension system is incredibly complex, which means even those in charge of it can make huge errors, miss payments and more.

"Some mistakes are automatically corrected; with others, it's don't ask, don't get. So you need to know to ask. This is big money, we've had some tell us of £50,000+ successes. Before the checks, an explainer..."

Martin Lewis, founder of MoneySavingExpert.com, explained that each qualifying National Insurance year acts like a "token" towards the State Pension.

These can be built up through employment, self-employment, claiming certain benefits or receiving National Insurance credits, including for childcare.

Under the current rules, people need at least 10 qualifying years to receive any State Pension, while around 35 qualifying years are needed to qualify for the full amount.

Which State Pension rules apply depends on when someone reaches State Pension age, as there are two separate systems in operation.

Those qualifying after 5 April 2016 fall under the new system, which currently pays up to £241.30 weekly, equivalent to £12,548 annually.

The older system applies to those who reached pension age earlier, paying a maximum of £184.90 per week or £9,615 yearly, though additional components can increase this figure.

The first essential step is verifying your state pension forecast through the Gov.uk website to determine whether you are on course for the maximum weekly payment.

Additionally, the Gov.uk National Insurance record checker reveals any gaps in your contribution history.

The system operates on a straightforward basis: years are either recorded as complete and qualifying, or incomplete and non-qualifying.

Even with some incomplete years showing, there may be no cause for concern if your overall forecast indicates full entitlement.

However, those with gaps in the previous six years have the option to purchase those missing years.

This approach proves particularly valuable for people approaching State Pension age who are unlikely to accumulate sufficient qualifying years through regular employment.

Before buying, it is worth checking whether any years can be claimed without charge.

Those who took time away from work between 1978 and 2010 to raise children or care for someone with a long-term disability may have incorrect gaps affecting their pension.

The Government ceased sending notification letters about this issue last year, placing responsibility on individuals to investigate themselves.

Married, divorced or widowed women who reached State Pension age before 2016 should also check their records, as hundreds of thousands were underpaid because their entitlement was not properly calculated based on their husband's contributions.

Parents and grandparents can potentially claim free NI credits. Family members under State Pension age who provided childcare for under-12s since 2011 may have credits transferred to them.

Unpaid carers providing at least 20 hours weekly assistance to someone receiving qualifying benefits such as Personal Independence Payment are entitled to free NI credits through the Carer's Credit scheme.