How to plug the pension gap by buying National Insurance credits  

Older people have been given more time to fill gaps in their National Insurance (NI) record so they can maximise their state pension payouts, but it may not be worth it for everyone.

The government was set to amend a rule letting men born after 5 April 1951 and women born after 5 April 1953 plug gaps in their NI history, dating back six years.

But a change to the state pension in 2016 created a “longer, one-off concession” that let people make catch-up payments for the tax years from 2006-07 to 2015-16, explained The Telegraph.

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These arrangements were set up to give people “under the age of 70(ish) more time to accumulate enough ‘qualifying’ National Insurance years to receive the full new state pension”, said MoneySavingExpert.

The deadline had already been extended from 5 April to 31 July as helplines run by the Department for Work and Pensions (DWP) and HMRC have been “overwhelmed”, the financial website said, with many people voicing concerns that they could not get through after calling dozens of times.

The cut-off has now been extended to 5 April 2025 after reports of “continuing problems” reaching the DWP or HMRC’s payment line, explained FTAdviser.

The intention is that this will spread the load of calls and give time for more staff to be trained to cope with the high level of interest, added the financial website.

Explaining its decision, the government said extending the deadline until 2025 means people have more time to properly consider if the payments are right for them “and ensures no one need miss out on the possibility of boosting their state pension entitlements”.

Why National Insurance contributions matter

People need 35 years of qualifying NI contributions to get the full state pension, which is currently worth £203.85 per week, said BBC News. But “some people may have spaces in their National Insurance record, if they have lived abroad or taken time off for caring responsibilities”.

If you have less than 35 years of contributions, said The Money Edit, you will get a smaller pension. The good news is that you can plug the gap by paying voluntary Class 3 contributions – “otherwise known as National Insurance credits”.

Topping up NI credits means taxpayers with incomplete years in their National Insurance record “could be financially better off in their retirement”, said Yahoo.

How to check if you need to contribute more

You can use the government’s state pension forecast calculator to check if you have gaps in your contributions. If there are gaps in a NI record, the forecast will look smaller, said The Telegraph.

The forecast will also give you a summary of how much you’re set to receive weekly according to your current and projected contribution level, explained MoneyWeek.

You may also be able to get extra NI credit without paying more.

Those in receipt of working tax credit, universal credit or carer’s allowance can “fill their records for free for the corresponding period”, said the Financial Times. However, they will need to contact the government’s helpline to establish whether paying will increase the value of their state pension.

How to buy more National Insurance credits

The process of filling gaps isn’t quick or easy. You need to call the Future Pension Centre if you’re below state pension age or the Pension Service if you’re already at state pension age, and then HMRC to get a unique 18-digit reference number.

Without accessing support from these official channels, said MoneySavingExpert, it is not possible to confirm which “incomplete” years are worth filling, or to make your payment with your reference number.

One MoneySavingExpert reader reported calling the helpline 112 times and being cut off every time, so the extended deadline is helpful. “With less pressure on the official helplines, it should now be easier to get through – though this isn't guaranteed.”

Once you have the 18-digit number, said CityAM, paying for the missed years can be done by online bank transfer, at your bank or building society, or by sending a cheque to HMRC.

“With the clock ticking,” the newspaper said, “anyone looking to make up the shortfall should start the process straight away to ensure you make up those missed years before it is too late.”

Is it worth it?

Buying extra credits is “not a decision to be taken lightly”, said The Money Edit, as it costs £824 to add an extra year of voluntary contributions – “a significant sum for many”.

For that amount you’ll get an extra £5.29 added to your weekly state pension, or £275 per year – or £5,500 over a 20-year retirement, the website said. The rate for a self-employed person is lower, at £163.80 per year.

If you buy five years of NI for £4,121, said MoneyWeek, that will boost your retirement pot by £27,500 – “a staggering return” of nearly 600%.

That’s a pretty good return on the initial investment, added the financial website, especially if you have the cash and were thinking of investing it in something else.

It may not be worthwhile for everyone though.

You may have some gaps earlier in your career, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, told MoneyWeek, “but if you continue to work then you may still be able to accumulate enough years to get the full amount”.

Additionally, if you are ill, the Telegraph added, you “may not be drawing on the state pension for very long and spending cash now may not be advantageous”.

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Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously written for FT Adviser, This Is Money, the Mail on Sunday and MoneyWeek. This article is based on information first published on The Week’s sister site, The Money Edit.