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April 28th 2023

State pension: why you should check your NI contributions record now

In early April, the full basic State Pension rose by 10.1% to £203.85 per week, but the actual amount received may be less than this if you have gaps in your National Insurance record. Even if your retirement age is well into the future, it is important to check your record at an early date, so that you can take action to improve your National Insurance record if you need to.

Each ‘qualifying year’ of National Insurance contributions is worth 1/35th of the State Pension rate (with the current rate of £203.85, each qualifying year is worth £5.82 of State Pension per week plus any future rises in the standard rate), although you will need to have at least 10 qualifying years in order to be eligible to claim any State Pension, so if you only have 8 qualifying years when you reach retirement age, you will not be able to claim any State Pension. Even if you already have 35 qualifying years, you still need to continue to make any compulsory National Insurance contributions under you reach State Pension age, for example, if your employment earnings are over the National Insurance threshold.

It is worth viewing your State Pension forecast to check how many years of contributions you have. If you have gaps in your record, you may be able to pay voluntary contributions to fill these gaps and improve your record. Ordinarily, you can normally only pay voluntary contributions for up to 6 prior tax years, however, following changes to the State Pension in 2016, the Government permitted late contributions for the years from 6 April 2006 to 5 April 2016; originally, these contributions had to be paid to HMRC by 5 April 2023, however, the deadline was recently extended to 31 July 2023. After that date, it will no longer be possible to make voluntary contributions in respect of the years from 2006-2016, and instead it will be the normal 6-year deadline (e.g. contributions for the year ended 5th April 2018 must be paid to HMRC by 5th April 2024).

You can check your State Pension forecast online, by logging into your Personal Tax Account (https://www.gov.uk/personal-tax-account), and navigating to your National Insurance record. Your record will show the amount of State Pension you would be entitled to based on the current rate of State Pension, as well as your National Insurance contributions history, including which years are gaps, whether you are within the time limit to make contributions for those years, and how much this would cost. The cost of filling a gap year varies, depending on which Class of National Insurance you are eligible to pay (voluntary contributions are either Class 2 or Class 3), and whether you have a partial year of contributions or credits.

Even if you have not paid National Insurance contributions in a tax year, you may still receive a credit to your record, including if your earnings from employment are above the ‘Lower Earnings Limit’, or if you were in receipt of certain benefits including, but not limited to: Carer’s Allowance; Employment & Support Allowance; Jobseeker’s Allowance; and Universal Credit.

You can check the effect of making additional contributions by calling the Future Pension Centre (0800 731 0175). If you previously had ‘contracted-out deductions’ (essentially a cheaper rate of National Insurance paid via employment, in return for a lower State Pension, an option which was discontinued in 2016), it may be possible to top up your forecast to offset the effect of the contracted-out deductions, but the Future Pension Centre will be able to advise what effect paying for one or more gap years would have on your own forecast.

Once you have decided you wish to make a voluntary contribution, it is necessary to notify HMRC to obtain a unique reference number for your payment, so that your NI record is updated once paid (normally within 6-8 weeks of payment). The reference number is obtained by calling HMRC’s National Insurance helpline (0300 200 3500), or we can do this for you as your personal tax agent.

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