In 2016, the Basic State Pension changed to the New State Pension and the rules about the number of years of credit needed to get the full benefit also changed. The new rules state that an individual needs 35 years of full credits to be eligible for full State Pension and that, if they have less than ten years’ service, they won’t get any State Pension.

There are also transitional protections to ensure that no one who has earned credits under the old system is worse off. However, this adds additional levels of complexity. Individuals should check if they can get National Insurance credits before they look into paying voluntary contributions. Men born after 6 April 1951 or women born after 6 April 1953 are eligible to make voluntary National Insurance contributions to boost their New State Pension.

The Check your State Pension forecast service on GOV.UK is the quickest and easiest way for an individual to check what their pension will be in retirement and take action if they need to. It will be necessary to have (or sign up for) a Government Gateway account. People can also use the HMRC app to check their State Pension forecast. According to HMRC, since the launch of the enhanced digital service in April 2024, more than 4.3 million people have used it to check their State Pension forecast. The end-to-end service means individuals can also use it to check and view gaps in their National Insurance record, calculate the difference any payment will make to their State Pension and then make one payment for however many years they need to top up.

According to HMRC’s recent Press Release, more than 37,000 people have plugged gaps in their National Insurance record by adding a total of 68,673 years, worth £35 million, using its online service since April 2024.  

Analysis of the digital service has shown that: 65% of the years topped up by individuals were from 2017 onwards; the average online top-up payment was £1,835; and the largest weekly State Pension increase was £113.76.

HMRC and the DWP are reminding people they only have two months up until 5 April 2025 to fill any gaps from 6 April 2006 onwards. From 6 April 2025, people will only be able to make voluntary National Insurance contributions for the previous six tax years, in line with normal time limits.

According to HMRC, since the launch of the enhanced digital service in April 2024, more than 4.3 million people have used it to check their State Pension forecast. The end-to-end service means individuals can also use it to check and view gaps in their National Insurance record, calculate the difference any payment will make to their State Pension and then make one payment for however many years they need to top up.

Part of the reason why transitional protection is required is because of the need to have more than the previous 30 years of credits and, because many people were contracted out of the State Pension prior to 2012, it allows the purchase of missing years. This protection allows the purchase of full or part years that are missing all the way back to 2006. This option is being removed on 5 April 2025 and will revert to the standard six years as per legislation. Note that, where the rates of voluntary National Insurance went up from 6 April 2023, top-up payments made by 5 April 2025 will be paid at the lower (2022/23) rate. Please see here.

It’s important to consider if there are gaps that need filling and make the most of the option to go back to 2006. Not everyone needs to fill gaps, even if they currently don’t have full State Pension entitlement and care needs to be taken to avoid buying years unnecessarily.

When looking at the State Pension forecast, then, the first thing to consider is the projected pension figure, and then what the individual has already earned based on the current records and how many more years they need to get the full amount.

If the forecast shows, for example, that only three more years are needed, and the individual intends to work full time or receive credits for three years, then there is no need to do anything more. In addition, with just three years to accrue before retirement, then buying additional years should an individual decide to cease work shouldn’t be a problem because there are plenty of years until State Pension Age. There are other ways in which to accrue State Pension credits, some of which are automatic and some of which need to be claimed. More details can be found here.

More consideration is required where the numbers are more challenging, if there is a disparity between what an individual can hope to accrue before they reach State Pension Age.

In some cases, the forecast may seem too low. This can be for a number of reasons. For example, contracting out of the State Second Pension or SERPS. This could have resulted in a Contracted Out Pension Equivalent (COPE) deduction being made to the forecast. The COPE deduction is already included in the forecast, so there is no need to try and factor this additional information in. However, because the New State Pension accrues at a flat rate of 1/35^th for each year of credits under the new system. If an individual works longer then they can still get the full New State Pension at State Pension Age.

Further information

Please see voluntary National Insurance contributions.

The majority of people of working age will be able to use the online service, without needing to phone HMRC or DWP, including those living abroad who want to pay voluntary contributions for years they were resident in the UK. However, it is not currently available to those who are already receiving their State Pension, self-employed people or people currently living outside the UK with gaps incurred while working abroad. They can continue to manage their National Insurance as set out on GOV.UK.

HMRC app users can also see their pension details, including their current potential retirement date as well as annual, monthly and weekly forecasts as well as checking their National Insurance record.

Please also see our earlier Bulletin.

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This newsletter has been published by HMRC to update stakeholders on the latest news for Individual Savings Account (ISA) managers and Child Trust Fund (CTF) providers. It includes articles on:

• additional permitted subscriptions;
• National Insurance numbers;
• Repair of an ISA account where the overall subscription has exceeded the legislative limit;
• Partial transfers of current year subscriptions;
• European Economic Area (EEA) Undertakings for Collective Investment in Transferable Securities (UCITS) and the Overseas Funds Regime (OFR); and
• Extended period for issuing tax calculation (P800) letters.

Key areas of interest:

Additional permitted subscriptions

Since April 2015, spouses or civil partners of deceased ISA savers have been eligible for an additional ISA allowance, the Additional Permitted Subscription (APS), for deaths on or after 3 December 2014. For deaths on or before 5 April 2018, the allowance transferred to the surviving spouse/civil partner was equal to the value of the ISA on the date of death. However, for deaths on or after 6 April 2018, the APS can be either the value of the deceased’s ISA at their date of death or the point the ISA ceased to be a ‘continuing account of a deceased investor’, whichever is higher. For more information on this, please see Death of an ISA investor.

HMRC’s latest update says that, where an APS allowance based on the value at date of death was transferred but not used, and the continuing account of the deceased investor was not closed, there may be a higher additional permitted subscription allowance to which the spouse or civil partner is entitled when the estate is finalised. 

The transferring manager will be unaware if there has been an APS with the receiving manager. Similarly, the receiving manager will be unaware if there has been an increase in value when the estate is finalised.

There is no expectation from HMRC that the receiving manager will request a second APS value from the transferring manager, unless instructed to do so by the investor. Similarly, there is no expectation that the transferring manager will provide a second APS value to the receiving manager unless it has been requested by the investor or the receiving manager.

National Insurance number

Broadly, an individual will have, or is eligible to apply for, a National Insurance number if they are over the age of 16 and:

• are planning to (and have the right to) work and have a UK National Insurance liability;
• are claiming benefits;
• applied for a student loan;
• is paying Class 3 voluntary National Insurance contributions.

The Model Application Form is due to be updated. ISA managers are reminded the model form is an example only, and exact replication is not mandatory providing all the regulatory obligations are met. If the investor is eligible and does have their National Insurance number, the form will allow them to confirm this and provide the information. The form will also provide the relevant link where the investor can check if they are eligible for a National Insurance number. If the investor is eligible and does not yet have a National Insurance number, the form will allow them to confirm eligibility and direct them to where to apply for their National Insurance number. If the investor is not eligible for a National Insurance number, they can confirm this and continue to open an ISA providing other required conditions are met. The form will be amended to read: 

‘Please click on this link Apply for a National Insurance Number for information on National Insurance number which includes a section on who can apply.’

From 6 April 2025, managers can no longer accept an ISA application with a missing or dummy National Insurance number for new accounts. There is no change to the guidance for provisionally opening an ISA where all the required information is not provided straight away.

Repair of an ISA account where the overall subscription has exceeded the legislative limit

Previous year subscriptions

HMRC says that it has updated its guidance for invalid ISA accounts where the investor has exceeded the overall subscription limit in previous years. This is effective on all repair action taken from 6 December 2024. Only invalid investments in a repairable ISA will lose their tax exemption. This will be from the date of the first invalid subscription up to the date of repair (and could include current year investments). These dates are specified in a notice of discovery from HMRC to the ISA manager and the valid investments in a repaired ISA account may keep their tax exemption. Subscriptions to a repaired ISA for years other than that covered by the notice of discovery are not affected by that notice.

Current year subscriptions

If an ISA manager knows the investor has exceeded the subscription limit with the information they hold, they can void the invalid subscriptions. If the ISA manager is informed by the investor about the oversubscriptions, (for example, they’ve subscribed to accounts elsewhere) ISA managers should keep records. HMRC says that a phone call is acceptable if a record of the call is held.

European Economic Area (EEA) Undertakings for Collective Investment in Transferable Securities (UCITS) and the Overseas Funds Regime (OFR)

HMRC says that it is currently discussing with Financial Conduct Authority (FCA) the timetable for transitioning to OFR and the implications for funds which do not apply for OFR recognition. The outcome of those discussions will inform future newsletters. In the interim, managers should take no action regarding funds where OFR recognition had not been sought or has been denied.

Extended period for issuing tax calculation (P800) letters

In relation to non-ISA accounts, HMRC is reminding people that, due to higher than expected volumes, some individuals may have to wait until the new year to receive their P800s. This includes those who think they may have additional tax to pay on savings for the year ending 5 April 2024.

This is slightly longer than in previous years, where HMRC has aimed to complete most end-of-year PAYE reconciliations by the end of November. HMRC says that this process will be complete by the end of March 2025 and PAYE taxpayers are kindly asked not to chase until after that point. GOV.UK guidance is being updated to this effect. Please also see how to contact HMRC regarding income tax enquiries and our earlier Bulletin.

This is an example of one of the recent news bulletins that was posted on our Techlink website.  Signing up to Techlink will give you access to original articles, like this, on a daily basis.  Techlink also provides you with a comprehensive (and searchable) library of information, daily bulletins on developments of relevance to the industry, multimedia learning and professional development tools. Techlink can also be your ‘gateway’ for accessing consultancy through our ‘ASK’ service which enables you to receive responses to your technical questions from our highly trained technical consultants.

You can sign up for a free 30 day trial of Techlink at anytime.  For more information go to www.techlink.co.uk.