Time flies. Two years ago, and due to overwhelming demand, the Government agreed to extend the initial deadline of 31st July 2023 to those with gaps in their national insurance records, to make top ups to state pension entitlements. Now, the new deadline of 5th April 2025 is fast approaching.
DOES THIS AFFECT ME?
If you’re yet to reach your state pension age, you need 35 years of NI contributions to get the maximum state pension. If you have incomplete NI years, or missing years, from 2006/07 onwards, your NIC record can be topped up and you have until 5th April to do so. After this date, any missing years can only be topped up going back six years by paying class 3 voluntary NI contributions.
If you can make top up payments, it doesn’t necessarily mean that you should, and it’s something that you decide based on your individual circumstances. For instance, if you’re still working (or receiving NI credits another way such as you’re registered for Child Benefit or Carer’s Allowance) and you have a number of years to go before state pension age, you might reach the maximum 35 years anyway.
Additionally, even if you can top up your state pension, you should do the maths and take into account the cost of securing the top up versus the extra state pension you’ll receive.
Whilst a top up of the state pension for many can be sensible, don’t forget the extra pension will be taxed at your marginal rate. The extra net income secured might be welcome or worth the cost of the top up, but for some, in reality, it might not make that much difference to your standard of living. And don’t forget; your state pension is only as good for as long as you live, it doesn’t pass to anyone else.
IF I DO WANT TO LOOK AT THIS, WHAT SHOULD I DO?
The calculation of your state pension, your qualifying NI years and the cost of a state pension top up is a complex calculation and only the government (via the Department of Work and Pensions) can work this out for you. Hence the need to extend the initial deadline!
Step 1: You should get your state pension forecast using your government gateway account: Check your State Pension forecast – GOV.UK. This will tell you if you can improve your state pension. Don’t just look at the headline figure as this takes into account contributions up until your State Pension Age.
Step 2: Call the government’s helpline, the Future Pension Centre, on 0800 731 0175. You’ll need to have your NI number so they can locate your record.
The adviser at the Future Pension Centre will identify the gaps in your NI contribution years, the cost for filling in those years, by making a top up payment before 5th April, along with the corresponding increase to your state pension.
In certain circumstances, you could have a gap in your record but topping up won’t improve your State Pension, that’s why it’s important to talk to the Future Pension Centre. It can take 60 days for your record to update online after the payment has been made.
If you wish to talk through these numbers when you have them, please contact your Relationship Manager or drop a message to theteam@cooperparry.com.
Tax and state pensions planning is not regulated by the Financial Conduct Authority. Our understanding is based on current UK tax law and will be affected by changes in law and your residency/domicile status. This communication is for general information only and is not intended to be individual advice.