How to fix gaps in your state pension contributions

Recently, there has been massive publicity online, in the news, and on TV about how to fix gaps in your state pension contributions. This is due to a deadline of 5th April 2025 for backdating voluntary National Insurance (NI) payments.

This allowed people to pay voluntary national insurance contributions back to the 2006/2007 tax year

Thousands have taken advantage of this opportunity since the announcement of the original deadline date of April 2023.

However, due to overwhelming demands on HMRC and DWP, the deadline has been extended at least twice.

Why is there a deadline for making extra national insurance contributions?

In 2016, we saw the introduction of the new state pension. The number of qualifying years for a full state pension increased from 30 to 35 years.

To help those affected by the dramatic change, the government decided to allow people to make extra payments going back to the 2006/2007 tax year.

The amount of state pension you ultimately receive depends on your National Insurance contributions, so it’s crucial to fix gaps in your state pension if you have any before the deadline.

You can claim the new state pension provided you have 10 qualifying years on your national insurance record.

However, you will need at least 35 qualifying years to ensure you get the full state pension of £221.20 a week, £230.25 from April 2025.

Therefore, if you have between 10 and 35 qualifying years. You'll get a reduced amount and only a proportion of the new state pension.

Unless the new government extends the deadline again, which experts predict is highly unlikely. From 6th April 2025, making voluntary national insurance contributions will only be possible for the previous six financial years.

So, any gaps before 2019 will negatively affect your state pension entitlement calculation.

What are qualifying years?

A qualifying year is a tax year during which you have paid enough NI contributions.

Or have received NI credits for the entire year. You could also have a combination of NI contributions and credits covering the whole tax year.

If employed, you must earn at least £6,396 per year or £123 per week and pay Class 3 NI contributions for 2024/2025.

You pay full NI contributions if you earn £12,570 or more. So your qualifying years build up accordingly.

If you are self-employed, you must pay Class 2 NI contributions of £3.45 per week in 2024/2025.

However, if your profits are below £6,725, you may need to pay voluntary contributions

You may be eligible for NI credits if you are not working. Understanding qualifying years is essential if you want to fix gaps in your state pension before the 2025 deadline. For instance, if you receive child benefits for children under 12 years old.

Suppose you claim benefits such as Universal Credit, Carer's or Job Seeker's Allowances. And if you are a foster carer or caring for someone for more than 20 hours a week.

If you are unsure if you are entitled to NI credits, double-checking with DWP and HMRC is worthwhile.

How to check your national insurance record for potential gaps

The government has a new digital online service for checking your NI records and state pension forecast.

Details are also available via the HMRC app and logging into your personal tax account.

To find out what you will get from your state pension when you retire. Simply log into the UK Government Gateway.

You will need a 12-digit government gateway ID, and must register to get one if you do not have this ID.

You'll require an email address, which you will need to verify. Also, as part of the verification process, ensure you provide ID such as a valid UK passport and/or a current driving license.

Once registered and logged in, you can check your state pension forecast and identify where to fix gaps in your state pension.

You can see many statistics about your state pension. Such as how much you'll get, when you'll get it, your qualifying years, and ways to increase it.

You should be able to identify any issues that may need addressing quickly. It is all very thorough and easy to use!

If you cannot access the HMRC's online service, you must contact the DWP Pensions Service or the Future Pension Centre.

They will then be able to supply you with the information you require.

Is it worth making voluntary national insurance contributions?

Whether making voluntary NI contributions is worth it or will benefit you is dependent on your personal circumstances.

For younger people, achieving the entire 35 years of NI contributions may be possible through future years of employment.

It may be more worthwhile if you are closer to retirement age and want to fix gaps in your state pension that are still eligible for payment.

You need to consider, for instance, how long you expect to live. Some unfortunate people do not live long enough to claim their state pension.

If you are considering paying thousands of pounds, to fix your NI gaps. You must consider the time it will take to get back the money.

It can take several years before you get back what you pay.

There is also tax to consider. With the current income tax thresholds frozen. Extra state pension income could mean you pay more income tax.

Completely wiping out any financial benefits. If your total income, including the state pension, is over £12,570 for the tax year 2024/2025. You will be liable for income tax.

Many people have concerns about the future of the state pension. They are nervous about changes future governments are likely to make.

They worry about the constantly increasing qualifying age and whether the state pension will even exist when they reach retirement age. That’s why many are rushing to fix gaps in your state pension before the rules change.

What is the cost of making voluntary NI contributions?

If you decide that you are likely to benefit, from making voluntary NI contributions. The easiest way is to do it online.

The details of the cost of each missing full year should be easily accessible.

Then the payment process is relatively easy. Follow the instructions given on the website.

Costs vary for different tax years. Below are current costs payable for full years of class 3 NI contributions, 2019 to 2025.

You will pay class 3 NI contributions unless you are self-employed when you pay class 2 NI contributions

 

Tax year	Annual amount	Weekly amount
2019/2020	£824.20	£15.85
2020/2021	£795.60	£15.30
2021/2022	£800.80	£15.40
2022/2023	£824.20	£15.85
2023/2024	£907.40	£17.45
2024/2025	£907.40	£17.45

 

For every complete extra year of NI you pay for. You will get £6.32 more a week or £328.64 a year in state pension income.

The state pension increases annually and is currently under the protection of the triple lock. 

Final thoughts

The end goal of paying voluntary NI contributions is to get more state pension income in the long run for paying a small amount now. This makes it a strategic move if you need to fix gaps in your state pension.

For example, one extra NI year for £907.40 would result in receiving more than £1,600 over 5 years and more than £3,200 over 10 years.

You could get back thousands of pounds for paying hundreds now.

The government's pension review is ongoing and assessing state pension sustainability issues.

The new labour government is sure to try to address the problems of spiralling costs. There are fears that the current 'triple lock' guarantee of annual pension increases is at risk.

Whatever the government decides, any drastic, immediate changes will affect the future of millions. People do not like constant uncertainty, especially when they are approaching retirement.

They want to be able to make concrete plans for the future, and one way to do that is to fix gaps in your state pension while you still can.