In our blog last month about pensions, we mentioned that people need 35 years of national insurance contributions before 2016 in order to qualify for the full state pension (and there are different calculations for those who have contributed fewer years or have contributed after 2016 – you can read more here).
It is possible to top up national insurance contributions and as some deadlines have recently changed, we thought it was worth devoting a whole blog to talking about that.
Gaps in the record
Many people who are planning for their retirement find they have gaps in their national insurance record. This might be because they lived and worked outside the UK, were unemployed but not claiming benefits or were employed but on low earnings or self-employed and only earning small profits.
These gaps may mean there are not enough qualifying years to receive the full state pension.
It is possible to fill the gaps by making additional voluntary payments to top up the account.
Checking the national insurance record
The first step in deciding whether a top up is required is to check the national insurance record which can be done by following this link https://www.gov.uk/check-national-insurance-record . This will show the total number of qualifying years and if there have been any years where there have not been enough contributions.
Checking eligibility
If there are gaps, then head to this link https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions to check on eligibility to pay additional NI contributions. Most people will pay Class 3 contributions while those who were self-employed will pay Class 2 – each class has a different weekly rate.
Looking back at the years
Individuals can usually only pay voluntary National Insurance contributions for the previous 6 tax years and the deadline is 5 April each year. So the deadline for topping up contributions for the 2020/21 tax year is 5 April 2027.
The transitional arrangements around the introduction of the New State Pension in April 2016 meant the years back to 2006 could be topped up and at the beginning of this year, HMRC had a deadline to top up gaps in years between then and 2017 of 5 April 2023. Just before that deadline was reached, it was extended to 31 July 2023 and it has recently been extended again to 5 April 2025.
That gives everyone more time to check their national insurance records and decide whether to top up their contributions. It also gives more time to afford and make those payments.
It also means that men born after 5 April 1951 and women born after 5 April 1953 who were also part of the transitional arrangements on the introduction of the New State Pension have until 5 April 2025 to make voluntary contributions if they are eligible.
This is quite a complicated subject and we have only summarised the situation in this blog so if anyone wants more information, they should look at the HMRC website, look at their personal tax account or possibly consult their financial advisor to see if topping up contributions would be worthwhile.