Should I look at topping up my State Pension?

Category: Retirement

Voluntary National Insurance contributions can help ensure you have enough qualifying years to get the full State Pension.

If you have gaps in your record, you might be able to make voluntary contributions to fill them. In the past, you have only been able to fill the last six tax years. However, when the Government introduced the new State Pension from 6 April 2016, they also provided an easement which allowed individuals to fill in gaps as far back as 6 April 2006. This easement ends on 5 April 2023, meaning individuals have a little over nine months to take advantage of it.

The press tried to grab readers’ attention by stating that £55,000 was up for grabs. They based this on backfilling ten qualifying years, increasing an individual’s State Pension by £52.90 per week, and receiving the extra income for 20 years. Filling each year could cost between £165 and £825.

What should I consider if I am thinking about topping up?

Anyone considering topping up should take a range of factors into account, including:

  • Some years can be ‘cheaper’ to top up than others; for example, people who have worked part-year and have paid some NICs may be able to complete that year more cheaply than buying a blank year;
  • Filling blanks for specific years (particularly those before 2016/17) can sometimes have no impact on your State Pension, which is particularly relevant for people who have already paid in 30 years by April 2016 and who were long-term members of a ‘contracted out’ pension arrangement;
  • People who expect to be on benefits in retirement may find that they lose some or all of any improvement in their State Pension due to reduced pension credit or housing benefits;
  • Self-employed people can save money by paying voluntary Class 2 contributions (currently £163.80 per year) rather than Class 3 contributions (£824.20 per year);
  • Before paying voluntary NICs, individuals should see if they can claim NICs credits for a particular year. For example, those looking after grandchildren may be able to claim credits transferred from the child’s parent, which could be a cost-free way of boosting their State Pension;
  • If you die before reaching State Pension age, you won’t get any State Pension;
  • If you’re in very poor health, or if you have a short life expectancy, you might not get the benefit of an increased State Pension in relation to your payment;
  • You might be able to use contributions from your spouse or civil partner, late spouse or civil partner, or former spouse or civil partner to improve your basic State Pension without the need to pay voluntary contributions;
  • Finally, an improved State Pension might mean you pay more tax.

 What should I do next?

  • Before you pay for any voluntary contributions, requesting a State Pension forecast is a good idea to get information on your State Pension entitlement.
  • When you have your forecast, you need to find out if voluntary contributions will increase your State Pension entitlement when you reach State Pension age because they won’t always increase it.
  • Lane Clark & Peacock LLP has produced an interactive tool aiming to guide individuals through a series of quick questions, based upon details found on their State Pension forecast, to decide whether it is beneficial for them to look at paying voluntary NICs. This tool represents the views and understanding of Lane Clarke & Peacock LLP. The link to their tool is provided strictly for general consideration only, and no action must be taken or refrained from based on this. Specialist advice must always be sought.
  • If you decide you want to make voluntary contributions, there’s more information on how to pay on the GOV.UK website. There are two types of voluntary contribution, Class 2 voluntary contributions and Class 3 voluntary contributions



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