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 1/35th 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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