If you can afford to, you may want to buy missing years in your National Insurance record to boost the amount of State Pension you receive in retirement.
If you’re a man born after 5 April 1951 or a woman born after 5 April 1953, you have until the 5th April 2025 to pay voluntary contributions to make up for gaps in your NI record between 2006 and 2016. After this date, the number of years you can buy falls to the last six years, so if you have missing years from decades ago you won’t be able to make these up.
The deadline was previously set for the end of July 2023, but the government’s service was overwhelmed by people wanting to top up their records, so they agreed to extend it to give people more time. Read more in our article Deadline to boost State Pension extended to April 2025.
Buying extra years involves paying what are known as ‘voluntary class 3 NI contributions’, and the rate is currently £907.40 for a full year (£17.45 per week), which will boost your State Pension by around £302 a year (£5.82 a week).
Sir Steve Webb, a former pensions minister and partner at Lane Clark & Peacock, said: “You’ll get your money back from a year’s worth of voluntary contributions within about four years of drawing your State Pension, and everything after that is a profit.”
However, while buying extra years to plug any gaps in your NI record can be good value for money and potentially increase your State Pension by thousands of pounds over your lifetime, it’s not always the right thing to do. Whether it’s worthwhile will also depend on factors out of your control such as how long you live beyond State Pension age.
Here, we explain how to check if you’ve gaps in your NI record, and whether it’s worth making them up to increase your State Pension entitlement.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.
Alternatively, if you’d like advice on your private pension, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Please note that Fidelius can discuss private pensions, but is not able to advise on the State Pension and defined benefit / final salary (e.g. NHS) pensions.
Contents
- How the State Pension works
- Do you have missing years in your NI record?
- How much extra State Pension will you receive if you pay voluntary contributions?
- Should you pay voluntary NI contributions to complete your record?
- How to pay voluntary NI contributions
- Other ways to increase your State Pension
- Where to go for pensions help
How the State Pension works
The new State Pension applies to people reaching retirement age on or after 6 April 2016, so most people currently aged around 70 or under are eligible for it. The maximum State Pension amount is £221.20 a week in the 2024/25 tax year.However, the amount you actually receive is based on how many ‘qualifying National Insurance (NI) years’ you have built up, and just one missing year will cost you around £302 a year in State Pension.
If you haven’t made enough contributions, then you won’t receive your full entitlement to the State Pension, which forms the foundation of most people’s retirement incomes. Find out more in our article How the State Pension works. However, you may be able to pay voluntary contributions to increase the amount you receive, even if you’ve already retired.
You’ll usually only be eligible for the maximum new State Pension if you’ve made 35 ‘qualifying years’ of NICs, and you must have at least 10 years’ to receive any State Pension at all. You’ll get qualifying years for every year you’re in work, and earning above a minimum amount (£242 a week in the 2023/24 tax year) or if you’re paying voluntary contributions. You can also get National Insurance credits if you’re working but are earning between £123 and £242 a week, or if you’ve taken time out of your career to bring up children or look after someone who’s ill or disabled.
However, the rules aren’t necessarily clear cut for anyone who started building up their NI record before 2016, when the new State Pension was introduced. The number of qualifying years needed for a full State Pension is based on your age and NI record to date, but this can be impacted by whether or not you contracted out of the Additional State Pension. Read more in our guide State Second Pension and SERPS explained. The best thing to do to find out where you stand is check your record, and you can find out how to do this below.
Bear in mind that if you’re a man born between 6 April 1945 and 5 April 1950 or a woman born between 6 April 1950 and 5 October 1952, you fall under the old basic State Pension system, and you must make any top up payment within six years of any gap in your NI record.
Do you have missing years in your NI record?
The first thing you need to do is work out where you currently stand and if you have any missing years in your National Insurance record.
You can find out how much State Pension you’re on track to receive by requesting a State Pension forecast, which will include how much you’re on track to receive based on your current NI record, and how much you’re likely to get if you continue working up to State Pension age.
Bear in mind that the State Pension age is under review and is gradually being pushed back in line with rising life expectancy. At present, it’s set to increase to 67 by 2029 and again to 68 between 2037 and 2039.
If the amount isn’t what you’re expecting, and you’re not on track to receive the full amount (currently £221.20.85 a week in 2024/25) you need to check your NI record, which will show you any incomplete years in your record since 2006. If you have gaps, you might want to consider paying voluntary contributions to fill these in order to receive a higher State Pension.
How much extra State Pension will you receive if you pay voluntary contributions?
As mentioned, if you have a gap in your record, paying for an extra year on your NI record means you’ll receive an extra £5.82 a week of State Pension, or £302 a year.
Becky O’Connor, head of pensions and savings at Interactive Investor, said: “If you don’t have a full state pension entitlement because you didn’t manage to build up enough qualifying years through your working life, and you end up living several years after your State Pension entitlement age, then buying extra State Pension through additional voluntary contributions can offer an exceptional return on an initial investment.
If you were to paying for a year’s worth of voluntary contributions, you’d get your money back in three years and over the total lifetime of your State Pension, you’d receive far more than you initially paid for. The average person receives their State Pension for at least 20 years, over which time you’d receive an additional £6,040 for the upfront cost of £907. Topping up the two most recent tax years is also slightly cheaper (£800.80 for 2021/22 and £824.20 for 2022/23, compared to £907.40 in the 2023/24 and 2024/25 tax years).
Bear in mind that the State Pension usually rises in line with the triple lock to ensure it won’t lose value in real terms. This means it’s usually guaranteed to rise by the highest of September’s inflation figure, earnings growth, or 2.5%. The triple lock was temporarily suspended for a year in 2022 as wages soared disproportionately in the wake of the pandemic. The government reinstated it in April 2023. Read more in our article What is the pension triple lock?
Should you pay voluntary NI contributions to complete your record?
The closer you are to retirement, the easier it will probably be to decide whether it’s worth topping up your record. O’Connor said: “By the time you reach your mid to late fifties, you will have a good idea of whether you are on track to reach the number of qualifying years you need for your full state pension. You will also have a sense of whether you are likely to make up for any shortfall for years remaining in the workforce. Remember that you don’t need to be working full time to make a full qualifying year of National Insurance contributions.”
If you’re not on track to receive the full State Pension (£221.20 a week), paying to complete missing years may be particularly worthwhile. However, if you’ve decades to go until you reach retirement, bear in mind that you may have plenty of time to work and make up the years needed to receive a full State Pension, or receive NI credits.
If you didn’t pay National Insurance Contributions for a period because you were caring for ill or disabled loved ones or you were raising children, then as mentioned, you may be able to apply for NI credits which contribute towards your State Pension entitlement. You can check your eligibility for these here, although the majority of people will have automatically received any NI credits they’re entitled to.
However, before paying voluntary contributions, you should check if you can receive NI credits for a particular year. Webb said: “For example, those looking after grandchildren may be able to claim credits transferred from the child’s parent, and this could be a cost-free way of boosting their state pension.”
If you’re self-employed or you have been in the past and your annual profit is, or was, between £6,725 and £11,908 a year, you automatically receive NI credits towards the State Pension. However, if you earn less than £6,725 you don’t receive any credits, so you may want to consider paying voluntary contributions to top up your record. Bear in mind that people self-employed may be able to save money by paying voluntary Class 2 contributions (currently £179.40 per year) rather than Class 3 contributions (£907.40 per year).
Sir Steve Webb said: “If you have some years that are partly complete, it’s worth topping these up first as it’s cheaper. For example, if you’ve been a carer for part of the year one year. Also, if you’re self-employed and have gaps in your record it’s usually pretty clear cut that it’s worth paying to top up your record.”
However, things can get more complicated if you were ‘contracted out’ of the additional State Pension before 2016. In this scenario, paying to plug gaps in your NI record may not be worthwhile, as you may not receive any more State Pension as a result. Bear in mind that you’re more likely to have been contracted out if you worked in the public sector, but whether it’s worth paying to fill in gaps in your record entirely depends on your personal circumstances and it’s really important to check where you stand.
You can use the government’s Future Pension Centre (if you’re not yet at State Pension age) and the Pension Service (if you’re already at State Pension age) to find out if you’re likely to benefit from paying voluntary contributions, and how to do this if you want to go ahead. Both can help with information about your NI record, tell you how much it’ll cost you to top up incomplete years, and whether doing so is worthwhile to increase your State Pension.
Lane Clark & Peacock has launched a new online tool to help people work out whether it’s worthwhile paying voluntary contributions to boost their State Pension.
Webb said: ”It’s not giving financial advice, but it does help people to ‘decode’ the information they can get from the government. In some cases our site will simply confirm what they had already concluded, but in others it will help them to discover the potential of top-ups.”
Take into account any other income you may receive
If you are likely to be receiving only your State Pension in retirement, and have no savings or other assets, then it may not be worth paying to top up your entitlement, as you’ll receive this anyway with Pension Credit.
Webb said: “You could make things worse if you exceed the amount you need to claim Pension Credit and then miss out on other benefits that come with this, such as a free TV licence.” However, bear in mind that there’s no guarantee that this benefit will still be available once you reach retirement age, pay the same amount, or have the same eligibility criteria. Find out more in our guide Pension Credit Explained.
The majority of retirees are basic-rate taxpayers, but if you are likely or already on the threshold of paying higher rate tax or reaching the higher rate tax bracket (£50,270 in the 2024/25 tax year) once all your income is combined, you risk paying more tax if you receive a greater amount of State Pension. It may still be worth paying voluntary contributions to increase your entitlement, but it’s worth using an income tax calculator to work out how many years it’ll take to make up for paying the extra amount.
Case study example
Brian Moore, 65, from Birmingham
Mr Moore is a retired local government worker who reached State Pension age in 2023. He had been a member of the Local Government Pension Scheme which was ‘contracted out’ of the state earnings related pension scheme (SERPS). This meant that there was a deduction from his State Pension to take account of this, and he was set to receive less than the full flat rate at that time of £185.15 per week.
Mr Moore checked the new LCP site to see if it was worth paying voluntary contributions to increase his State Pension entitlement. He discovered that by paying a lump sum of around £4,000 to fill gaps in his NI record from 2016/17 onwards he could boost his State Pension by around £28 per week. He also discovered that a period when he was a carer for his elderly father had resulted in some NI credits on his account which gave him ‘part years’ of contributions for two financial years.
By paying voluntary contributions to cover just the missing weeks of those years, he was able to add full ‘qualifying years’ to his record at a reduced cost. Mr Moore contacted the DWP Future Pension Centre to check the figures and then HMRC to arrange payment and can received an increased amount when he started drawing his State Pension.
How to pay voluntary NI contributions
If you’ve worked out that paying voluntary Class 3 NI contributions will give you a greater State Pension, and you want to go ahead, you can spread your payments out over the coming months.
To pay voluntary contributions, you’ll need a reference number from HM Revenue & Customs (HMRC) to ensure they are added to your NI record. You can then make the payment through your bank, either online or in branch, to the HMRC bank account for voluntary Class 3 contributions. Bear in mind that the payment can take up to 60 days to process if you’ve yet to receive your State Pension, when you can check your NI record to ensure the relevant gaps have been filled. If you’re claiming your State Pension, HMRC will contact the Department for Work and Pensions (DWP) and request that it conduct a benefit review. While your State Pension payment will not rise immediately, any increase should be backdated to the date you paid the voluntary contributions.
Other ways to increase your State Pension
There are other ways to boost the amount you receive in State Pension by, for example, delaying it for a few years. You don’t have to start claiming your new State Pension as soon as you reach State Retirement age.
You can defer it if you want to, which will mean you end up with a higher pension when you do start claiming it. It will increase every week you defer, as long as you defer for at least nine weeks.
For each year you defer, you’ll get just under a 5.8% increase in your new State Pension. So, for example, if you deferred your pension for 52 weeks, you’d get an extra £12.83 a week (about 5.8% of £221.20).
However, if you’re claiming certain benefits, you can’t get any extra State Pension and deferring might also affect the amount you can claim. Find out more about deferring your State Pension, and whether it’s worth it in our article Deferring State Pension – How much can I get and is it worth it?
Where to go for pensions help
You can find out more about your State Pension, how it works and how to claim it from the Pension Service.
If you’re not sure whether you’re saving enough to supplement your State Pension in retirement, or you want more help, you might want to speak to an independent financial advisor who can recommend the best course of action based on your personal circumstances.
If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased, or for more information check out our guide on How to find the right financial adviser for you.
Alternatively, if you’d like advice on your private pension, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor.
Fidelius are rated 4.7 out of 5 from over 1,250 reviews on VouchedFor, the review site for financial advisors. With your free consultation, there’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Please note that Fidelius can discuss private pensions, but is not able to advise on the State Pension and defined benefit / final salary (e.g. NHS) pensions.
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