Individuals with gaps in their National Insurance Contributions (NIC) record may need to act now if they want to maximise their State Pension entitlement.
Anyone with incomplete NIC records in the period since April 2006 can currently make extra payments to fill those gaps, but the opportunity to make up any shortfalls for the period from 6 April 2006 to 5 April 2019 will no longer be available after 5 April 2025.
Background
The ‘new’ State Pension was introduced in April 2016 for people retiring after that date. It generally requires 35 complete years of NIC contributions in order to receive the full State Pension. Anything between 10 and 35 complete years will normally result in a pro-rata reduced State Pension entitlement, although these criteria may differ for people who were already paying NIC before April 2016.
Incomplete years can arise in an individual’s NIC record if their earnings are below the threshold for full NIC to be payable (for instance due to low earnings, career breaks, working part-time or working overseas).
An individual’s NIC record is made up not only of NIC paid on employment income, but also any NIC paid either voluntarily or in respect of self-employment. NIC credits are also available in some circumstances such as when on parental leave or claiming Jobseeker’s or Carer’s Allowances, so it is important for individuals to review their NIC record to ensure any life events qualifying for NIC credits have been treated correctly.
The current opportunity is more generous than the normal period for which ‘top up’ payments can be made – after 5 April 2025, individuals will only be able to make voluntary NIC payments in respect of the previous six tax years.
How do I check my State Pension and top up my NIC record?
Individuals can review their NIC record online. The Check your State Pension forecast tool shows current and predicted State Pension entitlement, before going on to check whether voluntary NIC payments could increase these amounts. Both services require a Government Gateway login to access, and can also be accessed via the Personal Tax Account or the HMRC App.
How much does ‘topping up’ cost?
Using the Check your State Pension forecast tool, anyone with gaps in their NIC record should be shown how much it would cost in voluntary NIC payments to fill that gap in order to make a full year of qualifying NIC payments.
Most users should then be shown the impact that top up payment is expected to have on their weekly State Pension entitlement, before having the option to make a voluntary payment online direct from their bank account.
Is it worth making extra payments?
Individuals who identify gaps in their NIC record will need to consider their future working plans before making any voluntary contributions. For instance, anyone expecting to still work sufficient years to accrue the 35 years of full NIC contributions needed to secure a full State Pension may not need to make voluntary payments.
Anyone with gaps in their NIC record relating to periods when they were self-employed or were working or living abroad will be advised to contact the Future Pension Centre if gaps in their NIC record are identified, rather than using the digital payment options referred to above. This is because there may be cheaper ways to top up their NIC record, which are not supported by the digital service.
Finally, it is worth remembering that the State Pension forecasts provided may not prove accurate if changes are made to the rules regarding pension entitlement before users reach State Pension age.
This article reflects the position at the date of publication. If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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