Individuals wishing to maximise their State Pension entitlement are able to purchase credit for missing years by making voluntary class 3 National Insurance (NI) contributions and the government is now giving people more time to make these contributions.
When the ‘new’ State Pension was introduced, transitional arrangements were put in place to allow people to go back all the way to 2006 to purchase any missing years. Originally, there was a deadline set of 5th April 2023 to purchase these historic years, however, following capacity problems on government helplines, this was pushed back to 31st July 2023. This deadline has now been pushed back further to 5th April 2025 to allow individuals to purchase any missing years from 6th April 2006.
Individuals can usually only pay voluntary NI contributions for the previous six tax years and after 5th April 2025, the usual six year deadline will resume.
In addition to extending the deadline, the cost of paying voluntary NI contributions for years between 6th April 2016 and 5th April 2023 will remain frozen until 5th April 2025.
How do I check if this will benefit me?
Filling in any gaps in your NI record by paying for voluntary NI can be money very well spent, but not everyone with an incomplete NI record will benefit by doing so. which is why it’s so important to obtain a State Pension forecast from Department for Work & Pensions (DWP) in the first instance.
Once you’ve determined that you have a shortfall, and these gaps are not going to be filled naturally through employment or other means, you should call the Government’s pension helpline to discuss your record and how to make payment. You can find contact details at: https://www.gov.uk/future-pension-centre
Whilst the cost of one full year’s class 3 NI is c£824 (2022/23 rate), this would see your State Pension increase by £302.86 pa. At this level, it would take around 3 years of the State Pension being in payment to ‘break even’ on the cost contribution. It would take a little longer if you’re a basic rate, higher rate, or additional rate taxpayer, however. But this is still a very good deal, given the average life expectancy.
We check State Pension entitlement for our clients as part of our service. If you would like to discuss this further with the team, please do not hesitate to get in touch.
