The time limit for an individual to fill gaps in their record by paying voluntary National Insurance contributions is 6 years, but deadline extensions are now giving people extra time to plug gaps and boost their State Pensions.
Originally, the cut-off for making voluntary NI contributions for the tax years from 2006–2017 was this April, but the government extended the deadline to the end of this July to give people a little more time to address gaps in their records.
Now, as announced in June, the government is further extending this deadline to 5th April 2025 – allowing an additional couple of years for people to make retrospective NI payments for gaps between 2006–2007 and 2017–2018.
It’s believed the deadline has been extended this far to ensure as many people as possible can get the help they need with completing their NI records, as the government’s pension helplines were reportedly overwhelmed in the last few months.
The cost of voluntary NI contributions for these years is also frozen until the new deadline, at the former rate of £15.85 per week (though the current rate is £17.45).
This means that people can properly consider whether they need to pay voluntary NI contributions or not, preventing some from missing out on increasing their State Pension entitlements. Read on to learn how your pension could be affected.
Why do National Insurance contribution years matter?
The new State Pension can be claimed by men born from 6th April 1951 and women born from 6th April 1953 onwards when they reach the eligible age.
To be able to claim, the individual must have enough ‘qualifying years’ on their National Insurance record. These are tax years during which the person made enough NI contributions through employment taxes or voluntary payments, or received enough National Insurance credits through claiming certain state benefits.
How much you will receive in your State Pension when it’s time to claim it – currently £203.35 per week – will also depend on how many ‘qualifying years’ you have.
Generally, you need at least 10 years to claim a part-pension, and around 35 years to claim a full State Pension. Years when you didn’t pay NI contributions, or only partially paid, can create gaps in your record that won’t count towards these numbers.
Fortunately, the government allows people to fix these gaps by making voluntary NI payments known as Class 2 or Class 3
contributions.
To add a full year of contributions would cost around £824, though partially complete years may be cheaper to fill with payments of £15.85
for each missing week.
Making voluntary contributions doesn’t always increase pension payments, but it’s likely to do so for people who may be employed or self-employed with low earnings, unemployed without claiming benefits, or living/working outside the UK.
As mentioned earlier, there is usually a strict time limit for ‘buying back’ years of NI contributions, so it’s important to check whether you have any missing years.
You’ll lose the opportunity to restore ‘qualifying years’ between 2006–2018 after the April 2025 deadline, so bear this in mind when considering voluntary payments.
How to check your National Insurance contribution record
If you are concerned about your State Pension eligibility, the first thing you should do is check your National Insurance record online.
Your personal tax account will state how many full years you have contributed since the age of 16, and how many non-full years have created gaps in your record.
The second thing you should do is check your State Pension forecast. This will tell you how much you would get in your pension based on your current NI record.
If you have incomplete years and your forecast shows less than the current £203.35 a week, you could improve this by making voluntary NI contributions.
You will need your existing Government Gateway ID and password to log in and access this information, or you can sign up to create a personal tax account if you don’t already have one.
Is it worth paying voluntary National Insurance contributions?
Voluntary contributions don’t always increase pension amounts, and not everyone will benefit from making voluntary ‘top-up’ payments.
For example, if you are already projected to receive a full pension, or are currently receiving a full State Pension, you cannot receive more than this, so there is no need to make voluntary payments for any years that might be missing.
If you are a man and were born before April 1951, or you are a woman born before April 1953, you should be on the old State Pension, so the new rules won’t apply to you.
If you are currently at or near State Pension age – which is 66 years old
until 2028, when it will increase to 67 years old – you should definitely check whether voluntary contributions could give your pension a final boost before you retire completely.
If you have enough time between your current age and the State Pension age to complete enough ‘qualifying years’ – i.e. enough working years – then you may not have to worry about top-up payments right now, unless you are moving abroad.
Similarly, if you are under 45 years old, you are likely to have enough years left to make full NI contributions through work or benefit credits to qualify for the State Pension before you reach the minimum age to claim it.
Even if you are relatively young, it’s never too early to plan for your retirement properly, so it’s still worth looking for any partial years that could be upgraded to full ‘qualifying years’ with minimal voluntary NIC payments.
There may also be some scenarios where you can fill gaps in your record for free with backdated National Insurance credits, depending on your circumstances.
Get help with National Insurance contributions for your State Pension
You no longer need to rush or panic over filling gaps in your National Insurance record by the end of this month, as you now have up to two more years to work out the best plan for your State Pension
before the transitional rules come to an end.
That said, you shouldn’t put it off for much longer – especially if you are close to retiring. You can also fill gaps in your NI record even if you’ve already started claiming your State Pension, so you shouldn’t wait to find out whether you could receive extra support.
There are many complex considerations involved in optimising your National Insurance contributions to get the most out of your State Pension, which all depend on your personal circumstances throughout your working life.
This is why it’s so important to get personalised advice by calling the Future Pension Centre (or contacting the Pension Service if you are already of age to claim).
After checking your record and forecast in your personal tax account and consulting the appropriate government pension department, you may want to seek personal financial advice to help you with pension planning.
At GBAC, our friendly financial advisers would be more than happy to discuss your situation and assist you with maximising savings and managing tax liabilities.
Get in touch with our Barnsley
accountants to find out more.