Buying National Insurance Years
New Deadline
This guide is for men born after 5 April 1951 and women born after 5 April 1953.
Under the current state pension system, the maximum flat rate pension is currently £185.15 a week; but how much someone will actually get depends on how many 'qualifying' National Insurance (NI) years they have.
In order to obtain any state pension an individual must have at least 10 qualifying years of contributions and in order to receive the maximum flat rate pension, 35 qualifying years are required.
To allow people to obtain the number of full NI years required to get the maximum state pension there are 'transitional arrangements' in place, which allow you to pay voluntary contributions to fill gaps in a NI record dating back to 2006.
Previously the deadline for this arrangement was set at 31 July 2023; however, from March this year this deadline has been extended to 31 July 2025, after which it is only possible to fill gaps going back six tax years. So there is a potentially worthwhile opportunity to consider, and action to be taken, in the next two years.
For those who qualify and are able to, paying to fill NI gaps could boost their state pension significantly for a relatively small cost - (£15.85 per week [£824.20 per year] for 2022/23, rates vary according to the year being “topped up”), so it may be a beneficial exercise. You must be eligible to pay voluntary NI contributions for the time that the contributions cover: for eligibility criteria see Voluntary National Insurance: Eligibility - GOV.UK (www.gov.uk)
Some examples of people who may not have a full record and who should look at their current funding position:
- Employed, but had low earnings
- Not working and were not claiming benefits
- Self-employed but did not pay contributions because of small profits
- Living or working outside the UK.
How much would topping up add to my state pension pot?
Just one qualifying year of NI at the standard rate of £824.20 adds £5.29 a week, or £275.08 a year, to your pre-tax state pension. It is therefore worth it as long as you live at least three years after claiming your state pension.
According to the investment platform Interactive Investor, spending £824 today to top-up your NI record could add £1,515 to your state pension over five years or £6,060 over 20 years. These figures are based on the new full state pension payment of £10,600 for the 2023/24 tax year.
The table below illustrates that if you buy 10 years of NI for £8,242, that could boost your retirement pot by £15,150 over five years or £60,600 over 20.
Source: Interactive Investor These figures are for example only and are not guaranteed.
There are a number of variables, so it is prudent to approach the decision in stages.