The new State Pension - extra time to boost your entitlement

If you’re not on track to receive the full State Pension when you retire, the deadline for making voluntary National Insurance contributions to cover gaps between April 2006 and April 2017 has been extended to 31 July 2023.

How much is the State Pension worth?

For most of us, the State Pension is an important part of retirement income planning. Anyone who reached State Pension age* after 6 April 2016 with full entitlement currently gets a guaranteed income of £203.85 per week (£10,600pa) for the 2023/24 tax year. This amount increases each year in line with the higher of:

a) National average earnings
b) The Consumer Prices Index (CPI) measure of inflation, or
c) 2.5%

There’ve been big increases in the cost of living over recent years. So the guaranteed rises in the State Pension make it an invaluable benefit.

It’s worth checking you’ll get the level of State Pension you’re entitled to - and seeing whether you can boost it if necessary.

Eligibility and entitlement

To qualify for a full State Pension, you’ll need a complete National Insurance record of 35 years. And to get anything at all, you’ll need a minimum of 10 qualifying years.

Broadly speaking, you build up your entitlement by:

• Working and paying National Insurance
• Receiving NI credits
• Paying voluntary NI contributions

It’s easy to check your NI record and State Pension forecast by logging in to the Government Gateway website. This will tell you what level of State Pension you’ve accumulated to date, and what extra NI credits you’ll need in order to get the full entitlement.

If you already have a full entitlement or are on track to reach it (based on how long you plan to continue working and paying NI), you don’t need to do anything.

But if you’re not expected to reach full entitlement - or you’ve already reached State Pension age and don’t have full entitlement - you may be able to pay voluntary NI contributions to cover some of the years you’ve missed.

NI credits

Before you think about making voluntary NI contributions, it’s worth checking whether you have any applicable NI credits that haven’t yet been added to your record. There’s a full list on the government’s website.

One particular NI credit to consider is Child Benefit. Where a parent is registered for Child Benefit for a child under age 12, they automatically get NI credits. This applies even if they don’t actually claim the benefit (usually because of means testing).

It’s also important the Child Benefit is registered in the name of the parent who benefits from the credit (for example, if they stopped working to look after their child). If a mistake has been made, these credits can be transferred between parents.

Finally, since April 2011, it’s been possible for grandparents or other family members to receive NI credits if they’re caring for a child under 12 while their parent (or main carer) is working. Known as Specified Adult Childcare credits, this can even include remote caring (such as telephone or online) after March 2020 if the normal caring arrangements were affected by Covid. Claims can be backdated to 2011.

Making voluntary contributions

You might be able to pay voluntary contributions to fill any gaps in your NI record. Usually, it’s only possible to pay for gaps for the previous six years. However, men born after 5 April 1951 and women born after 5 April 1953 now have until 31 July 2023 to pay for any eligible gaps between the tax years April 2006 and April 2016. This effectively creates a window of just over 16 years. After 31 July 2023, this will revert to the usual six-year period.

How much will it cost?

The cost to fill in gaps in an NI record for the 2022/23 tax year is up to £3.15 per week / £163.80 a year for class 2 (self-employed) contributions or up to £15.85 per week / £824.20 a year for class 3 (voluntary national insurance) contributions.. These rates will apply up to 31 July 2023. After this date, rates will increase to up to £3.45 per week for class 2 contributions and up to £17.45 per week for class 3 contributions.

Each additional qualifying year equates to an extra £5.82 per week (£302.64 pa) of State Pension benefit, based on 2023/24 rates. It’s easy to see the value of making these contributions. Voluntary payments can be made as a one-off payment or by quarterly or monthly instalments

• This article is for information purposes only and the views contained are not to be taken as advice or a recommendation for any product, service or course of action.
• If you need advice about how any of this information applies to you personally, you should contact an authorised financial adviser.

*State Pension age is currently 66 and rises to 67 between 2026 and 2028. It will then rise again to 68 between 2044/46 (although a proposal has been made to bring these dates forward to between 2037 and 2039).
** The average earnings increase was temporarily suspended for 2022/23 following distortions to the earnings statistics.

WI0523/WF1315275/SSO/0524