How to boost your National Insurance record before the April deadline

Article written by Kellands Hale, our preferred independent advice firm.

This article is not intended to be financial advice to any individual. The views expressed are those of the author and Moneyfactscompare.co.uk does not endorse the content.

One of the bedrocks of your retirement income is likely to be the State Pension.

Although it will be unlikely to make up most of your income when you stop working, the new State Pension could provide you with up to £185.15 a week as of the current tax year. With the triple lock set to come into effect in April, this figure could increase to £203.85 a week.

However, it is important to stress that these amounts aren’t guaranteed if there are gaps in your National Insurance record.

A gap is defined as a period when you did not pay National Insurance or get National Insurance credits. For example, it could have been when you worked and paid tax abroad.

Usually, you can address these gaps by voluntarily paying in your National Insurance contributions (NICs) for the years you missed between 2006 and 2016.

However, the rules will slightly change this year as after 5 April, you’ll only be able to plug gaps going back six tax years.

Below we’ve explained how to easily pay for missed NICs between 2006 and 2016, and everything else you need to know about the process.

If you wish to check your new State Pension eligibility and potentially back-fill your NICs, you can check your State Pension forecast on the Government website.

There, you will find how many qualifying years you have worked so far, and how much you are set to receive if you continue working until State Pension Age.

Usually, you must work 35 qualifying years to receive the full new State Pension, but this isn’t always simple. Some years may not count towards your eligibility if you:  

• Did not earn enough to pay NICs, such as starting your own business, or taking time off for family
• Worked abroad or paid tax in another country
• Could not work due to ill health or injury.

So, even if you think you’re in the clear, it is important to double-check your eligibility before April.

Although choosing to pay extra NICs could cost you now, your money could be returned to you many times over when you begin receiving the full new State Pension.

Here’s how it works:

So, based on the 2022/23 rates, if you lived 20 years after you began receiving the new State Pension, you’d receive more than £5,000 back for either spending £163.80 or £824.

Essentially, if you “bought” an additional year of State Pension, you would recover the cost of the additional NICs after four years (net of basic-rate tax). Everything beyond that would be profit.

Remember: you can’t boost your State Pension past its maximum value. So, if you are already entitled to (or on track for) the full new State Pension, you will not need to buy previous years’ NICs.

It’s easy to forget that work is not the only thing that can offer you qualifying years. National Insurance credits can replace NICs and help boost your State Pension eligibility.

Here are 10 ways you could have earned National Insurance credits between 2006 and 2016.

1. You received Statutory Sick Pay, and so were not earning enough for a qualifying year.
2. You were eligible for, but not claiming, Employment and Support Allowance.
3. You were wrongly imprisoned and unable to work, as long as your conviction has now been overturned.
4. You received maternity, paternity or adoption pay that did not allow you to earn enough for a qualifying year.
5. You accompanied a spouse or civil partner overseas as part of their service to the British armed forces.
6. You cared for a family member under 12, and you were aged between 16 and State Pension Age. This is sometimes referred to as “grandparent credits”.
7. You cared for an ill, injured or disabled individual for 20 hours a week or more.
8. You were called for jury service while in employment.
9. You were a foster carer after 6 April 2010.
10. You were unemployed and actively looking for work.

To apply for National Insurance credits and potentially boost your State Pension eligibility, visit the Government website ahead of the April deadline.

Although choosing to pay extra NICs could cost you now, your money could be returned to you many times over when you begin receiving the full new State Pension.

Here’s how it works:

So, based on the 2022/23 rates, if you lived 20 years after you began receiving the new State Pension, you’d receive more than £5,000 back for either spending £163.80 or £824.

Essentially, if you “bought” an additional year of State Pension, you would recover the cost of the additional NICs after four years (net of basic-rate tax). Everything beyond that would be profit.

Remember: you can’t boost your State Pension past its maximum value. So, if you are already entitled to (or on track for) the full new State Pension, you will not need to buy previous years’ NICs.

It’s easy to forget that work is not the only thing that can offer you qualifying years. National Insurance credits can replace NICs and help boost your State Pension eligibility.

Here are 10 ways you could have earned National Insurance credits between 2006 and 2016.

1. You received Statutory Sick Pay, and so were not earning enough for a qualifying year.
2. You were eligible for, but not claiming, Employment and Support Allowance.
3. You were wrongly imprisoned and unable to work, as long as your conviction has now been overturned.
4. You received maternity, paternity or adoption pay that did not allow you to earn enough for a qualifying year.
5. You accompanied a spouse or civil partner overseas as part of their service to the British armed forces.
6. You cared for a family member under 12, and you were aged between 16 and State Pension Age. This is sometimes referred to as “grandparent credits”.
7. You cared for an ill, injured or disabled individual for 20 hours a week or more.
8. You were called for jury service while in employment.
9. You were a foster carer after 6 April 2010.
10. You were unemployed and actively looking for work.

To apply for National Insurance credits and potentially boost your State Pension eligibility, visit the Government website ahead of the April deadline.

As you may have realised by now, there’s a lot to consider when deciding to buy NICs for previous years. If you have already made up your mind and wish to fill in the gaps, follow the instructions on the Government website as soon as you can.

Although the deadline is approaching, it could be constructive to discuss your options with your Kellands financial planner. It may be that buying additional years of NICs isn’t cost-effective for you, so consulting an expert can put your mind at rest when deciding what to do next.

For a discussion about NICs, the State Pension or any other financial matter, email us at hale@kelland.co.uk, call 0161 929 8838, or click here. 

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

© Kellands (Hale) Limited is authorised and regulated by the Financial Conduct Authority. FCA Firm Reference No. 193498