Deadline now 2025
The extension means that you now have more time to make additional National Insurance (NI) contributions and fill any gaps in your record that may otherwise reduce your State Pension entitlement.
Normally it is possible to make voluntary NI contributions for the past six years but an extension that allows top-ups back to and including the 2006/7 tax year has now been extended for a second time (it was originally due to end on 5 April 2023).
Currently, in order to receive the full State Pension individuals must have a total of 35 ‘qualifying’ years of national insurance contributions.
With the full State Pension being £10,600 for 2023/24, this essentially means that each qualifying year is worth £302.86 per year in State Pension. And remember, the payment is currently guaranteed to increase by a minimum of 2.5% per year thanks to the Triple Lock.
Given that the average retirement is 20 years, topping up a single year of NI contributions could be worth more than £6,000 in additional pension.
What are ‘qualifying’ years
A ‘qualifying’ year is a tax year (6 April - 5 April) in which an individual has received a minimum amount of earnings for National Insurance purposes. This is known as the Lower Earnings Limit.
For 2023/24 the Lower Earnings Limit is £6,396 which can be earned in a single lump sum if you are a director of a company, but must be made up of 52 contributing weeks of £123 per week if you’re an employee.
This can be a mixture of earnings and National Insurance credits which may be available in certain circumstances where someone is unable to work.
Remember - the amount of NI you pay during your working life is not relevant, it is the number of qualifying years that counts.
Note: Dividends do not count as earned income
Why is this happening?
Broadly speaking, State Pension arrangements changed in 2016 when the New State Pension was introduced.
The system for anyone retiring after 6 April 2016 is more straightforward as it is made up of a single payment, rather than a ‘basic’ and ‘additional’ element that is a feature of the Old State Pension.
However, with the Old State Pension, you needed 30 years of qualifying NI contributions. With the New State Pension, you need 35 years.
Transitional arrangements were therefore put in place to allow anyone who would be affected by the increase from 30 to 35 years of qualifying contributions to top up any incomplete years.
These transitional arrangements were originally due to end on 5 April 2023 but were extended to 31 July 2023 and now 5 April 2025.
Why the further extension?
The official answer is that the success of the scheme, which has seen “tens of thousands” of people check their pensions entitlement and top up if needed, means that the government wants to allow “tens of thousands” more people to do the same.
Pensions Minister, Laura Trott, said: “I am pleased to see so many people taking steps to review their State Pension, which is why we have extended the deadline for customers to add extra years to their National Insurance record.
“This extension means thousands more people will have time to check their entitlement, and in many cases increase the amount they receive when they retire.”
The real reason may be connected to reports that both HMRC and the Department for Work and Pensions (DWP) have been unable to cope with the demand with helplines swamped.
What should I do?
Firstly, you should check your current National Insurance record by logging in to your Government Gateway.
If you have any incomplete years then these will be detailed together with information on what to do if you decide that making a voluntary contribution is the right thing for you.
If you’re not sure then please speak to us as your personal circumstances will generally dictate if it is the right thing to do.
As a rule of thumb, if you are approaching State Pension age then it will probably make sense to top up and if you are several years away then it may not. But please contact us to chat things through.