Should I pay to top up my State Pension?

Primarily this will affect anyone between the ages of 45 and 70 years old

Are you eligible for a full State Pension when you will need it?To be eligible for the full amount of State Pension you need to have made National Insurance (NI) contributions for 35 years.  If you have not paid National Insurance contributions for that many years, you will get a lesser amount of State Pension.  However, there is a limited window of opportunity to make additional National Insurance contributions to top up your pot.

The government scheme to make these additional voluntary National Insurance contributions going back as far as 2006/07 has been extended until 5 April 2025.

What is the current government scheme?If you aren’t on track to get the full State Pension, it’s possible to buy top-ups. Those with big gaps to fill can take advantage of the government offer to make voluntary National Insurance contributions (NICs) going back 16 years.

Normally, you can only make voluntary NICs for the previous six tax years. However, this government initiative has extended that period by a further 10 years. That means it’s possible to make voluntary contributions going back to the 2006/07 tax year.

The offer is open to people who reach State Pension Age after April 2016, which means it’s worth considering for anyone aged 45-70 who might have significant gaps in their National Insurance (NI) records.  The deadline for doing this is 5 April 2025.

How to check your state pension forecast1. Check your national insurance record:
The new online system launched by the government in April makes it easy for individuals to check and fill any gaps in their record, and then make any necessary payment to ensure that any missing years can therefore be treated as qualifying years, meaning that you could boost your state pension.

2. Check your state pension forecast:
If you have gaps in your NI record, and your forecast is not for the full £221.20 per week (based on current pension levels), then you can consider boosting your NI record by ‘buying’ the missing years.

Can you fill any National Insurance gaps for free?Before you ‘buy’ missing years in your NI record, in order to obtain entitlement to the full amount of State Pension, you may want to consider some of the following points to see if you may be able to obtain the entitlement in other ways:

• Caring for a child in the family:  Only one parent can claim the credits via Child Benefit, but you can transfer the credit from one parent to the other – more detail here.
• On statutory sick pay: You are/were on it and not earning enough for a qualifying year.
• On statutory maternity, paternity, or adoption pay: You are/were on it and didn't/won't earn enough for a qualifying NI year (additional statutory paternity pay also counts).
• Unemployed and actively looking for work: You needn't have been claiming jobseeker's allowance but will need to prove you were looking for employment.
• On Employment and Support Allowance: Eligible for it, but not claiming it.
• Caring for a sick/disabled person: If it is/was for at least 20 hours a week. See here for more details.
• On jury service: You are/were on it and aren't/weren't self-employed.
• Spouse of a member of the armed forces: You're married to, or are a civil partner of, a member of the armed forces and went with them on an overseas posting (additional eligibility rules apply here).

Should you pay voluntary contributions to boost your state pension?If a shortfall in state pension is likely and you’ve got NI gaps, you will need to decide by the deadline of 5 April 2025 whether to top up.

Some considerations

• If you’re at or near state pension age, and your state pension forecast is less than £221.20 a week, and you won’t be able to plug the gaps by any other means, topping up your NI contributions could be an obvious action to take
• Those older than 45 – it may depend on how far off the state pension age you are, as you may still have chance to earn enough qualifying years before you reach that age.  However, if that is unlikely, based on the forecast and assessments on the links above, then you may want to consider making these additional voluntary contributions
   

For example, a person with 10 years of missing contributions would be able to boost their State Pension by £3,286 per year in return for a one-off payment of between £8,000-£9,000 by taking advantage of the government’s offer before it runs out.

How to pay for additional years of missing National InsuranceIt can be complicated, so we would always recommend contacting the Government’s Future Pension Centre to obtain appropriate advice and bespoke calculations before you pay out any money.

Online:

1. Access the service through ‘Check your State Pension forecast’.
2. Once you’ve decided how many NI years to buy, you’ll be able to pay this securely online, and it will need to be paid in full at this point.

Phone:

1. If you can’t access it online as above, you will likely need to contact HMRC in the first instance for an 18-digit reference number – they may give this over the phone or send it in the post.
2. Once you have your 18-digit reference number, you can make a payment to HMRC using this reference.  Details of how to pay are here:

In summary

Primarily this will likely affect anyone between the ages of 45 and 70 years old.  We would recommend you check your NI record and State Pension forecast and see if there are any gaps that will reduce your State Pension amount when you reach retirement age.  If there are gaps, consider the other factors that may help qualify for missing years, without having to pay anything.  Then, if it makes financial sense to do so, you can go through the process of making additional voluntary NI contributions and securing your retirement pension and peace of mind. 

If you require any further assistance feel free to reach out to us via info@oldfieldadvisory.com or call 02476673160 and we will be happy to help.

Please note: This article is provided for information only and was correct as at time of writing (04/07/24). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.