Transitional arrangements for buying missing national insurance years from 2006 to 2016 end on 31 July 2023. This could be lucrative for many because you could spend £800 or less and get £5,500 back.
Buying national insurance years is really aimed at men born after 5 April 1951 and women born after 5 April 1953. A new state pension system was brought in on 6 April 2016, so most people roughly 70 or under are eligible for it. The maximum amount is currently £185.15 a week, but how much you will get depends on how many ‘qualifying’ national insurance (NI) years you have.
Many people will need about 35 full qualifying NI years, though for those who started their NI record before 2016, it is not that simple. How many years you need is based on your age and NI record up to now which could mean you need more than 40 NI years.
To make it easier for people on the new system to collect the number of full NI years they need to get the maximum amount of state pension, there are ‘transitional arrangements’ in place. These mean you can pay to plug gaps in your NI record dating all the way back to 2006. Yet this arrangement ends on 31 July, after which you can only fill gaps going back six tax years.
For some who qualify and have the cash, paying to plug NI gaps is a no-brainer that could boost your pension by £1,000s.
Here are some steps to follow to find out if it will be beneficial to do this:
Step 1
If you are not yet at state pension age you need to use the Government’s state pension forecast calculator. This will give you two pieces of information: how much state pension you will get based on your NI record to date and how much state pension you are likely to get if you work up to your state pension age.
If you are not predicted to get the full amount of £185.15 a week, you need to check gaps in your NI record. There is a link in your forecast to do this.
If you are already at state pension age, you need to check your national insurance record. That will show you any national insurance years since 2006 that are ‘incomplete’. If you have gaps that you are unlikely to fill by any other means, it could be worth paying to plug these to get a higher state pension.
Step 2
If you have gaps in your record, see if you can fill them for free with NI credits. Information about how to manually apply for any NI credits you are due is on the Government’s national insurance credits page.
Bear in mind, only full qualifying NI years count towards your state pension. This means even if you’ve paid some of your contributions (through earnings or credits), unless it’s a full year it will not count at all towards your state pension. But don’t worry – you can plug any shortfalls. Paying for a partial year is cheaper than buying a full year – as you’ll only pay proportionately for the weeks you’re missing – so can be a cost-effective way to boost your state pension.
Step 3
The checks above show how many years you already have, and how many are left. If a shortfall is likely and you’ve NI gaps for 2006 to 2016, you need to decide by the deadline of 31 July whether to top up.
- Those at or near state pension age will find it relatively easy to see if topping up may help.
- For those older than 45 but still some way off state pension age it’s more complicated, as you may still fill the gaps by other means.
- For most under the age of 45, it probably won’t make sense to pay for full NI years, but it might be worth checking if you can upgrade partial years on the cheap.
Step 4
Right now buying a full national insurance (NI) year costs £824, unless:
- You are topping up the two most recent tax years, in which case it’s about £20 to £30 cheaper, as you pay the original rate for those tax years.
- You are self-employed.
- You are topping up a partial year, in which case it’ll cost less to make it a full year.
If you would like to speak to us about whether buying national insurance years is worthwhile for you, then please get in touch.