Hi

A rule that allows people to fill gaps in their National Insurance contributions record to boost their state pension is set to change from 6 April 2023. Workers who miss the deadline could lose out on thousands in retirement.

You need at least 10 qualifying years of contributions (NICs) in your National Insurance record to receive any state pension, and 35 years to get the full amount. 

So, the question is should you consider buying extra years to top-up your state pension eligibility - as it's not the right choice for everyone?

Workers allowed to 'buy' extra years of NICs

Under normal rules, it’s only possible to fill gaps in your NI record for the past six year, with each year's deadline being on 5 April. You do this by buying voluntary Class 3 National Insurance Contributions (NICs). This means that you have until 5 April 2023 to fill any gaps from 2016-17.

After the 5 April deadline, the gap becomes permanent, and could affect how much state pension you're entitled to. 

However, the Department for Work and Pensions (DWP) temporarily relaxed this rule back in 2014, allowing some people to fill gaps for any year from 2006-07 onwards.

The rule was changed so those reaching state pension age in the early years of the new state pension, which came into force in April 2016, had an extended opportunity to assess whether they would be able to improve how much they got under the new system.

Under the new state pension, you need at least 35 qualifying years of contributions to get the full amount, and at least 10 years’ worth to receive anything at all.

Who is eligible to buy extra years?

The concession only applies to those who come under the new state pension system, which means you reached, or will reach, state pension age after 5 April 2016.

If you're a man born after 5 April 1951 or a woman born after 5 April 1953, you have until 5 April 2023 to pay voluntary contributions to make up for gaps between April 2006 and April 2016.  

You can check your National Insurance record online to see whether you have any gaps.

How much could your state pension be boosted?

Buying back missing years can be ‘extremely valuable’ in some cases. Someone with 10 missing years could pay out a little over £8,000 to fix the gaps, but see a boost of £55,000 in state pension over a 20-year retirement.

The current cost of Voluntary Class 3 NI contributions is £15.85 per week, or £824.20 per year. However, if you are looking to fill gaps that occurred in the past two tax years, you would pay the rate from those years. Voluntary contributions for gaps in 2021-22 cost £15.40 per week; for gaps in 2020-21, the cost is £15.30 per week. It will also be cheaper if you're only topping up a partial year's contributions.

Topping up can add up to £275 to your pre-tax state pension per year (1/35 of the full rate of the state pension worth £9,627.80 a year). This means after three years of receiving higher payments, you could get back what you'd paid for the Voluntary Class 3 NICs.  

Topping up isn't always a good idea

There are some situations where paying historic contributions will not boost your state pension payments. This could include those who are short of a full state pension due to extensive periods of ‘contracting out’. 

If you’ve already reached state pension age, contact the Pension Service to find out if you’ll benefit from topping up your contributions or access this website tool to help you decide if you can boost your state pension this way.

It's worth noting that you may be able to top-up missing years for free with National Insurance credits, especially the gaps in your NI record were due to illness, looking after children or being unemployed. 

How to check your National Insurance record

You may have gaps or part-years in your National Insurance (NI) record for a number of reasons - you may have been employed on low earnings, or unemployed but not claiming benefits. Those who were self-employed or worked abroad may also have gaps in their record.

You can check your National Insurance record on the government website; you can also check your state pension forecast online, where you can see how much state pension you'll get, when you can get it, and whether there are options to increase your payments. If you think there are mistakes on your record, you should contact HMRC.

How much is the new state pension worth?

In 2022-23, the full level of the new state pension is worth £185.15 a week, or £9,627.80 a year. The full level of new state pension will rise by 10.1% in 2023-24 to £203.85 a week.

Noel Guilford