Currently, HMRC allows you to voluntarily fill any gaps in your National Insurance record going back to 2006. By doing so, it’s possible to boost your state pension entitlement. As we reported in March, the state pension top-up deadline had been extended from April 2023 to 31st July 2023. This deadline has now been pushed back still further to 5th April 2025.
Why is the pension top-up deadline important?
When we reach the top-up deadline, you’ll only be able to fill any gaps in the preceding six years. This could have a significant impact on you if you have a lot of ‘missing’ years in your National Insurance record.
To qualify for the full state pension, you need 35 full years of qualifying National Insurance contributions. If you have between 10 and 35 years of contributions, you’ll only get a proportion of the full pension.
This means, that if you have a number of missing years between 2006/07 and 2018/19, it could be worthwhile topping up your contributions.
How much does it cost to top up a National Insurance year?
It costs £824 to ‘buy’ a missed year. For each year you buy, you’ll recoup the cost within 3 years of retiring. This is because each extra year adds about £275 to your pension.
Imagine you didn’t pay National Insurance for 6 years after 2006 because you were at home raising your family. You can buy these years back for £4,944. When you retire, you’ll get an extra £1,650 per year in your pension (at current rates).
The older you are, the more important it is to bring missed years up to date. Imagine you are 64 and due to take your state pension at 66. You have 30 years of qualifying contributions, but no ‘missing’ years during the last six years. However, you have five missing years from 2009 onwards. By buying these back now, you can ensure you get the full state pension when you retire.
How do I do a pension top-up?
The first thing you should do is check your National Insurance record. This will show you where any gaps are. You then need to call HMRC to get an 18-digit reference number that will allow you to make the voluntary Class 3 payments.
The next thing you should do is top up any partially paid years. For example, if you paid 50 weeks of NI contributions for 2012/13, you’d only have to pay £31.70 to turn it into a qualifying year. Once you’ve topped up partial years, then you should top up any missing years.
I’m already drawing my pension. Can I top it up?
You can still do a pension top-up if you are already drawing it. However, the procedure is slightly different.
Firstly, you’ll need to contact the Pension Service to talk through your options. If you do decide to top up your pension by buying missing NI years, the increase to your pension will not be backdated. In other words, you’ll get a higher pension after you’ve made the payments.
Whether it’s worth topping up will also depend on your age. If you are recently retired, you’re more likely to live long enough for the extra payments to be worthwhile. If you are older or in poor health, it may not be such a wise decision.
I’m not sure what to do. Can you help?
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.