As you meticulously plan for retirement, you may have focused on saving into a private pension. Though, it’s vital not to overlook the benefits of the State Pension, too, as it could form the bedrock of your retirement income.
While you may initially assume that the State Pension won’t be enough to support your desired lifestyle, it remains a valuable and guaranteed source of income.
To qualify for the State Pension, you must have paid enough National Insurance contributions (NICs) over the course of your life. If you have gaps in your record – perhaps due to a career break or taking care of a loved one – it may be worth filling them in before you reach the next phase of your life.
One way to do so is by purchasing additional NICs, but from 5 April 2025, new rules will change how far back you can make voluntary NICs.
Many people in the UK have seemingly done this already. Indeed, Today’s Wills and Probate reports that since April 2024, individuals have contributed a total of 68,673 years’ worth of voluntary NICs, amounting to £35 million.
With that in mind, continue reading to discover everything you need to know about the upcoming deadline, and why it might be prudent to top up your NI record now.
You need to accrue a certain amount of “qualifying years” to be entitled to the State Pension
In order to receive any State Pension entitlement at all, you must have at least 10 qualifying years on your NI record. Meanwhile, you need 35 qualifying years for the new full State Pension.
You can generally accrue these years in various ways, including:
- Paying NICs through employment or self-employment
- Making voluntary contributions
- Receiving NI credits in certain situations, such as caring for an unwell relative, taking a career break due to an illness, or claiming certain benefits.
A good starting point is to obtain a State Pension forecast from the government website, as this will show you your current record and an estimate of your future entitlement.
If, after doing this, you find you have gaps in your record, you may be able to fill them by purchasing additional credits.
Typically, you can buy voluntary NICs to cover gaps from the past six tax years.
However, until 5 April 2025, you can go further back and fill any gaps in your record from April 2006, provided you reached, or will reach, State Pension Age – which stands at 66 in 2024/25, rising to 67 by 2028 – after 2016.
After this deadline, the extended window will close, and you’ll only be able to purchase NICs from the six most recent tax years, meaning you won’t be able to fill any gaps from before 2019/20.
Topping up your National Insurance record could boost your State Pension entitlement
As mentioned, the State Pension can act as the bedrock of your retirement income.
Since the State Pension provides a guaranteed income from the age of 66, you could use this to cover essential costs such as food and utilities, while other forms of savings could help you deal with more significant purchases, like holidays or long-coveted home renovations.
For the 2024/25 tax year, the new full State Pension is worth £221.20 a week – or £11,502.40 a year.
Better yet, the State Pension typically rises each year thanks to the triple lock, which guarantees an increase based on the highest of:
- Inflation, as measured by the Consumer Prices Index (CPI) in the previous September
- Average year-on-year wage growth from May to July of the previous year
- A flat 2.5% increase.
Thanks to wage growth of 4.1%, the full new State Pension will rise to £230.25 a week – or £11,973 annually – in 2025/26. You will need 35 qualifying year on your record to receive the full amount; if you have between 10 and 35 years, your State Pension will be tapered down.
Nevertheless, this built-in growth is what makes topping up your record potentially so valuable, as it ensures that you’ll continue to benefit from future increases.
You may get back far more than you put in
According to Standard Life, Class 3 voluntary NICs costs £824.20 for a full year (though this may differ if you’re self-employed, or if you are buying NICs for the 2023/24 tax year onwards).
The same source states that buying one year of voluntary NICs could increase your State Pension entitlement by £275.08 a year.
So, if you start receiving your State Pension at the age of 66 and live for another 20 years, that single investment of £824.20 could add roughly £5,500 to your total retirement income.
It’s worth noting that you can claim credits in other ways
Before you purchase additional NICs, it’s first worth checking whether you can claim them by other means at no extra cost.
In fact, you may be able to backdate claims of NI credits if you have gaps in your record due to:
- Maternity leave
- Caring for an elderly or unwell relative
- Being unable to work due to illness or injury
- Looking after grandchildren under the age of 12 while their parents worked.
If any of these situations apply to you, you may be able to receive additional NI credits for free, boosting your overall State Pension entitlement for no cost.
Just remember that purchasing additional National Insurance contributions isn’t right for everyone
While filling gaps in your NI record can be highly beneficial, it’s worth noting that it isn’t the right choice for everyone.
Your overall retirement plan should consider other sources of income, including private pensions, savings, and investments. Or, you could already have enough qualifying years on your record, meaning buying additional NICs would not be necessary to receive the full new State Pension.
As such, you may want to speak with a financial planner before making a decision.
We could help you assess whether purchasing additional NICs aligns with your long-term financial goals and ensure that you make the most of the income available to you.
If you’d like some of this support, or would simply like to discuss the upcoming deadline, please call 01992 500261 or fill in our online contact form to organise a meeting and we’ll be in touch.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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