If you are planning to claim the UK state pension now is a good time to check your national insurance (NI) record as a government scheme allowing people to effectively ‘fill in’ gaps in their National Insurance record and boost their future state pension income is due to end very soon.
Until 5th April 2023, voluntary contributions can be made to fill gaps all the way back to April 2006, but this will no longer be the case from that date.
National insurance contributions are made by employed and self-employed people based on their earnings. You currently need 35 years of National Insurance Contributions (‘NIC’) in order to qualify for the full state pension, which is worth £185.15 a week in 2022/23. For part payment, a person must have contributed for at least 10 years.
Gaps in your NIC record could mean that when you retire, you will not have enough years of contributions (sometimes called ‘qualifying years’) to get the full State Pension.
You may have gaps in your NIC record for a variety of reasons and these could include:
- being employed but on a low income,
- you took a career break from work to focus on raising children, and child benefit was not claimed,
- being unemployed and not claiming benefits,
- you stopped work temporarily to care for elderly parents or relatives,
- being self-employed but you did not pay contributions because your profits were small,
- living or working outside the UK.
Under normal circumstances, you can only fill in gaps in your NIC record for up to six years after the year you are in. This would mean that the current tax year, 2016-17 would normally be the oldest year which could be filled in; therefore, leaving a permanent gap in your record for any relevant periods of low/non-earnings before that, which could then affect your ability to build up a full state pension.
However, under the current arrangements you can go back an additional 10 years and fill in gaps for any tax year from 2006/07 onwards – provided you opt to do so before 5th April 2023. After this date, the scheme will end and eligible people will only be able to fill in gaps in the last six years, and any previous gaps will be permanent.
To protect state pension and other benefits, it may be beneficial to make voluntary NI contributions to top up your contribution history, potentially increasing the amount of state pension you will receive.
What should you do next?
You should take the opportunity to check your NI record via this link to identify any shortfalls in your NI history.
You should then identify any differences between NI contributions paid and those showing on HMRC’s system. You will then be able to Identify any shortfalls in contributions and decide whether to make voluntary NI contributions
You may want to pay voluntary contributions because:
- you’re close to State Pension age and do not have enough qualifying years to get the full State Pension,
- you know you will not be able to get the qualifying years you need to get the full State Pension during your remaining working life,
- you’re self-employed, file Self Assessment tax returns, have low profits and did not pay voluntary Class 2 contributions.
We would always recommend you take financial advice when making any decisions as you will need to think about what contributions you could make before state retirement age and the risk of future changes in the rules.