The State Pension top-up deadline
This article was updated on 28.06.23 in line with HMRC’s announcement of a deadline extension.
5 April 2025 marks the deadline to be able to top up State Pensions.
The State Pension top up scheme, that was originally put in place by the government in 2015 and currently allows people to fill in historical gaps in their National Insurance record, is due to come to an end this year.
Why would I need to use the top up scheme?
Having gaps on your NI record could deeply affect the ability to accumulate a full State Pension. The purpose of the top up scheme was to allow people to fill any gap over a longer period, helping to safeguard their long-term financial security.
Once the scheme ends, it will revert back to the usual rule that you can only fill NI gaps of up to 6 years previous from when you are reviewing your records. Any gaps before this time will become permanent.
How do I know if I have NI gaps?
Gaps can appear in your record for a number of reasons, for example you may have been:
- Employed but below the earnings threshold to pay NI
- Unemployed and not claiming benefits
- Self-employed but small profits impacted contributions
- Living and working outside of the UK
All of which may have lead to not contributing to NI. You can visit the GOV.UK website to check if you have any gaps, if you’re eligible and how much it will cost.
Pensions in general can lead to a bit of head scratching, even more so when you may to make a decision with such an important deadline looming. That’s why we’ve asked our very own Terry Hewes, Director and Charted Financial Planner, to help break down what you need to do before the deadline, and what the previous extension of being able to go back on records really means.
Over to Terry…
As highlighted above, 5 April 2023 is an extremely important date for State Pensions, if you need to fill in significant gaps on your NI record.
The State Pension top up scheme has allowed people to go beyond the limit of 6 years. That means you can currently fill in gaps for any year, all the way back to 2006/07.
To put it into perspective, 2016/17 would normally be the oldest year which could be filled with records up to 2022/23, but the scheme allows you to fill gaps from as far back as 2006/07 – so an extra 10 years’ worth of contributions!
However, there are requirements to be eligible that you will need to be aware of. To be able to fill in records between 2006/07 and 2015/16, you have to be under the new State Pension system- that is, those who reached (or will reach) the State Pension age, which is 66 years old, after 5th April 2016.
If you’re able to, paying voluntary NI contributions is a great way to boost your State Pension in a cost-effective way, and can also be great value for money. Investing in top-ups, compared to other ways of using savings, can generate a much better rate of return.
Let’s take a deeper dive:
Buying back missing years can be extremely valuable for some. The current cost of voluntary Class 3 NI contributions is £15.85 per week – £824.20 annually. This one-off lump sum payment can add £5.29 per week or around £275 per year.
After four years of receiving the state pension, which for most people will be from the age of 71, the initial outlay would be recovered (net of basic rate tax) meaning everything beyond that would be profit.
I want to top up my State Pension- what do I need to do?
If you are thinking of taking advantage of the top up scheme for the years outlined earlier, I would advise checking with the Future Pension Centre at the DWP before making contributions.
There are some situations where paying contributions to make up for lost years would not actually boost your State Pension. This circumstance could be a reality for those who are short of a full State Pension, because of extensive periods of ‘contracting out.’ Contracting Out was a method of building up a private pension, so for anyone who was paying into one of these, their entitlement to pay into a State Pension was revoked for certain tax years. The Future Pension Centre will be able to advise on this.
Looking for more information?
If you are looking for further advice, you can contact one of our team members today by emailing info@wealth-experts.co.uk
