The State Pension is a crucial part of most people’s retirement income, so it’s vital to understand whether you’re on track to receive the full amount.
To receive the full new State Pension once you reach retirement age, which is currently 66 (rising to 68 in 2028), you’ll typically need to have paid 35 years’ of qualifying National Insurance contributions (NICs).
The full State Pension is £203.85 a week in the current 2023/24 tax year, or £10,600 a year, rising to £11,502 a year (£221.20 a week) in the 2024/25 tax year. The full old basic State Pension is £156.20 a week, and this will increase to £169.50 at the start of the new tax year. If you have fewer than 10 years of contributions, you won’t receive any State Pension at all.
However, while these criteria may seem relatively straightforward at first glance, as with many pension issues, the rules are not always so cut and dry. Your age, life events and specific circumstances could all impact the number of years needed to qualify for the full State Pension.
Alice Haine, personal finance analyst at Bestinest by Evelyn Partners, said: “You don’t necessarily have to be working to acquire a full ‘qualifying year’, for example, as you may be able to claim credits for missing years when you’ve taken on caring responsibilities.
“In addition, if you fall under the old State Pension system, the rules are different, and you only need 30 years to qualify for the basic State Pension. Whether you get more than this basic amount depends on whether you ‘contracted out’ of the Additional State Pension or not.”
The State Pension system can be complicated, so you may want to seek professional advice if you want help with understanding how this affects your retirement planning.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
Contents
- How many years of NI do I need for a full State Pension?
- What are the exceptions to the 35-year rule for a full State Pension?
- Contracted out periods
- National Insurance credits
- Old State Pension system
- How can I check I’ve paid enough National Insurance for a full State Pension?
- Should I pay voluntary contributions to fill gaps in your NI record?
- Where to go for pensions help
How many years of NI do I need for a full State Pension?
As mentioned, to receive the full new State Pension, you usually need 35 ‘qualifying years’ of NICs. If you have between 10 and 35 qualifying years, you get a proportion of the full State Pension. Find out more in our guide How the State Pension works.
However, having 35 qualifying years will only result in your receiving the full new State Pension if you have no National Insurance record prior to the 2016/17 tax year. Most people will have made, or been credited with, National Insurance contributions before 6 April 2016. In this case, transitional arrangements apply, so as not to disadvantage those who reached pension age before the new State Pension was introduced in April 2016. Under transitional arrangements, it is relatively common for people with more than 35 qualifying years not to receive the full State Pension amount (as the changes only came into effect from 2016/17).
Bear in mind that you may pay qualifying NICs for 40 years or significantly longer, for example, particularly if you started working when you were young and didn’t take any career breaks. Once you hit the 35-year mark, you don’t stop paying NICs, and you can’t build up entitlement to more than the full State Pension amount. The money you pay in NICs doesn’t sit in a pot for your future State Pension, as it’s used to pay the pensions of today’s retirees.
Understanding qualifying years
A qualifying year is earned for every tax year you’re employed and earning above a minimum amount (£242 per week in 2023/24) or if you’re making voluntary NI contributions. If you don’t earn enough to meet the lower threshold for paying National Insurance, you will still be treated as having qualifying years if you earn over £123 a week (employed) or £6,725 a year (self-employed). Bear in mind that you don’t need to work the full 52 weeks of the tax year to receive a full qualifying year. You just need to earn at least the minimum amount or receive NI credits (see below).
What are the exceptions to the 35-year rule for a full State Pension?
The typical requirement for the full new State Pension is 35 ‘qualifying years’ of NI, but as mentioned, this isn’t always the case. Here, we run through some other scenarios when the rules aren’t necessarily clear cut:
Contracted out periods
If you were ‘contracted out’ of the Additional State Pension (or SERPS, also known as the State Second Pension) before April 2016, these years still count towards your State Pension entitlement. However, the way your entitlement is calculated for this period differs, and if you were contracted out for many years, the amount of State Pension you receive may be reduced.
Contracting out meant paying lower National Insurance Contributions (NICs) and effectively accepting lower or no Additional State Pension. The Additional State Pension was an extra amount paid on top of the basic State Pension before the new State Pension system was introduced in April 2016. The money saved was paid into an alternative workplace or personal pension scheme. You can find out exactly how the State second Pension and SERPS works in our guide.
Your ‘contracted out’ years count towards your State Pension entitlement, even though you paid less NI during this time period. However, there’s a different way of calculating how much you will receive by what’s known as your ‘Contracted-Out Pension Equivalent’ (COPE). This is the Additional State Pension that you would have received if you’d not been contracted out during a period of employment before the introduction of the new flat rate State Pension in April 2016. Years worked from then onwards are added to your entitlement and likely to wipe out the impact of the deduction for contracting out, unless this was for a particularly long period of time.
For example, if you have 30 years of full NI and 10 years contracted out, you’re still likely to receive the full State Pension (but it’s wise to check your forecast). The lower NI you paid during this time simply means you weren’t building up Additional State Pension entitlements.
If you retired before April 2016, you might have received the full basic pension (currently £156.20 a week) in addition to some amount of Additional State Pension, or SERPS. Since then, retirees just get a maximum flat rate new State Pension of £203.85 provided they are entitled to this.
Example: Contracted out period
Here, we’ve taken a fictional example of Steve, age 55, who has been employed on average earnings all his working life. He will reach State Pension age in 2035, at age 67. He has 20 years’ of NI contributions, having worked full-time since he was 25. He contracted out of the State Pension for a period between 2002 and 2012 (10 years).
His State Pension entitlement is currently £158.70 a week, so £45.15 below the full flat State Pension at £203.85 in 2023/24. Provided he works for another five years, he should be on track to receive the full State Pension, as he still receives his entitlement during the contracted out period. If he works for a longer period, this won’t increase the amount he receives.
National Insurance credits
If you have gaps in your contribution record, you may be entitled to National Insurance credits for a period of unemployment, sickness, or time taken off work to care for family. These could make up the required number of years to qualify for a full State Pension.
NI credits are given to people who are unable to work and pay contributions because of particular life circumstances. Parents can receive credits until their youngest child turns 12 to cover the time out of paid work to raise a family, and grandparents caring for their grandchildren can also qualify (if they have not reached State Pension age). Read more in our article Caring for grandchildren: how it can help you boost your State Pension.
NI credits are also given to those caring for a sick or disabled person for at least 20 hours a week, and a number of different scenarios. While in many of these scenarios the qualifying years should be added automatically, different rules apply to each situation, so it is always worth checking your National Insurance record and claiming NI credits manually if they don’t appear.
Find out more about whether you might be entitled to NI credits and how to claim in our guide When can I claim National Insurance credits?
Rebecca O’Connor, head of public affairs at PensionBee, said: “For example, if you took six years out of work to care for children, your weekly pension would be £168.90 rather than £203.85 full State Pension, if you don’t claim NI credits. Over a 25 year retirement, you’d be missing out on £45,435 (£1,817 a year) through not claiming the credits.”
Old State Pension system
Before April 2016, the old system applied and the State Pension was split in two parts, made up of the basic State Pension and Additional State Pension (explained above).
If you’re a man and were born before 6 April 1951, or if you’re a woman born before 6 April 1953, you’ll likely be claiming the basic State Pension already. The most you can get from the basic State Pension in the 2023/24 tax year is £156.20 a week.
Under the old system, you only needed 30 qualifying years of NI contributions to receive the full basic State Pension amount. O’Connor said: “If you retired before April 2016 and were therefore on the old basic State Pension, the chances are you could receive even more than if you are on the new State Pension. That’s because you might also have been eligible for the Additional State Pension, or SERPS (the State Earnings Related Pension) as well as the basic amount, unless you contracted out of SERPS in favour of your employer’s scheme.”
How can I check I’ve paid enough National Insurance for a full State Pension?
You can find out how much State Pension you’re on track to receive by requesting a State Pension Forecast. This will tell you 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. Find out more in our guide How can I get a State Pension forecast?
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 you’re forecast to receive isn’t what you’re expecting, check your NI record, which will show you any incomplete years in your record since 2006. If you have any gaps, you might want to consider paying voluntary contributions to fill these in order to receive a higher State Pension. You can check your NI record on the government’s website here.
Should I pay voluntary contributions to fill gaps in your NI record?
If there are gaps in your National Insurance record, you can buy qualifying years by making Class 3 contributions. You can buy up to 10 years’ contributions at a rate of £17.45 per missing week of NI contributions (£907.40 per year). This will boost your pension by £5.82 a week, or around £302 a year. Bear in mind that you can only usually make up gaps from the previous six years.
If you were 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. For someone retiring at 66 with a full pension, paying £907 for an extra qualifying year means recouping that amount in just three years.
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. Read more in our guide Is it worth paying to top up your State Pension?
Where to go for pensions help
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
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
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