State Pension trick to beat National Insurance deadline

There's currently an opportunity to buyback missing years all the way back to 2006, but from April 6, that window closes. After  that, people will generally only be able to make voluntary NI contributions for the previous six tax years, in line with normal time limits, unless they use this new loophole...

However, the Government has now said that while the deadline of April 5 has been set for people to check their national insurance (NI) records and fill in any gaps going back as far as April 2006, anyone who registers for a callback will still be allowed to add their missing years.

The form has been placed on the gov.uk website, for those who are struggling to contact the Department for Work and Pensions (DWP) by phone to pay voluntary NI contributions.

The DWP will then contact the person on the phone number given to discuss payment.

A Government spokesperson said: “Our new online tool will mean that savers will be able to make top-up payments after the April 5 deadline, provided they complete the call back request form ahead of that date.

“This will enable us to ensure no one misses out, and to suitably manage demand as the deadline approaches.

“We also encourage people under state pension age to check whether it is beneficial for them to pay voluntary national insurance contributions by using our online checker.”

Anita Wright, Chartered Financial Planner at Bolton James has highlighted the difference buying back years can make: "Paying £907.40 for a year’s worth of contributions in 2024/25 will result in an additional £328.64 annually for life, indexed to inflation. In practical terms, this means that within three years of receiving State Pension, the amount invested would have been fully returned.

She adds: "The State Pension remains a key component of retirement planning, as for many it is often the only guaranteed income source linked to inflation through the triple lock.

"For those looking to maximise their State Pension, plugging gaps in their NI record can be a highly effective investment."

The gov.uk website says: “If you submit a request by the 5 April 2025 deadline, you will still be able to pay voluntary national insurance contributions after the deadline has passed.”

Not everyone has to pay for missing years - in some cases it is covered by years caring for relatives, and in particular when claiming Child Benefit. 

Tom Selby, director of public policy at AJ Bell, said: “There’s nothing like an impending deadline to sharpen the mind, and with just over a month until the closing of special rules allowing people to plug gaps in their National Insurance record going all the way back to 2006, the government is clearly bracing for a surge in demand.

"The decision to soften the deadline for those who try to contact the DWP in the next few weeks and request a call back suggests lessons have been learned from the previous government’s botched attempt to close this window.

“Provided a request for a call back has been made by the 5 April deadline, the government says any request to fill gaps going back to 2006 processed after this date as a result of a call back will be honoured. This pragmatic approach should help ensure anyone who wants to take advantage of the time-limited transitional measures has the opportunity to do so."

Before paying voluntary NI, check this is a sensible course of action. If you are young, for example, you will likely build up the required 35-year NI record naturally through work. Equally, it is possible to claim free NI credits from government if you care for children or elderly relatives.

Visit www.gov.uk/check-state-pension for more information

Tom adds: “The first port of call should be to review your NI record to see if there are any gaps to fill. From here, you can then consider if it’s likely to be beneficial or if there are alternative ways, such as claiming free NI credits, to boost your state pension entitlement.”

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Why do some people need to buy back National Insurance years for full State Pension?

To get the full basic State Pension you need a certain number of qualifying years of National Insurance. People with no National Insurance record before 6 April 2016 will need 35 qualifying years to get the full amount of new State Pension, when they reach State Pension age.

For people will have made, or been credited with, National Insurance contributions before 6 April 2016, their new State Pension will take into account their National Insurance record both before and after 6 April 2016.

The number of years varies by age, but the new rules make sure that the amount of State Pension you get for your contributions to 6 April 2016 is no less under the new State Pension than you would have got under the old rules, provided you meet the 10 year minimum qualifying period.

If you do not pay National Insurance you may have gaps in your National Insurance record. This could be because you were:

• employed but had low earnings
• unemployed and were not claiming benefits
• self-employed but did not pay contributions because of small profits
• living or working outside the UK

You may be able to pay voluntary contributions to fill any gaps. You can usually pay voluntary contributions for the past 6 years. The deadline is 5 April each year. For example, you have until 5 April 2030 to make up for gaps for the tax year 2023 to 2024.

Riz Malik, Independent Financial Adviser at R3 Wealth says: "Anyone planning their retirement should look at filling any gaps in their National Insurance contributions, as it can significantly enhance their State Pension. It’s straightforward to check your NI record online—particularly important for those who have been overseas, self-employed or who have experienced breaks in employment."

But, Ross Lacey, Director & Independent Financial Adviser at Fairview Financial Management emphasises that it's important to check individual circumstances before making a payment: "In our experience, it's worth everyone looking at their projected state pension and if it seems unlikely that they'll have the maximum available, to do some analysis and enquire about topping up or paying for part years.

"Generally, it takes around three years of receiving your state pension to 'pay back' the amount it cost to buy the extra years. Naturally, everyone is in a different situation though, so it's worth speaking with a financial adviser for personal advice on the best way to do this, or even if it will be needed at all."

What is a National Insurance Qualifying Year?

A qualifying year can be built up if:

• you are employed and earning over £242 a week (2024 to 2025) from one employer and paying National Insurance contributions
• you are employed and earning between £123 and £242 a week (2024 to 2025) from one employer and are treated as having paid National Insurance contributions
• you are self-employed and paying Class 2 National Insurance contributions (£3.45 a week in 2024 to 2025)
• you make voluntary National Insurance contributions (£17.45 a week in 2024 to 2025)
• you receive National Insurance credits 

If you do not earn enough you can get National Insurance credits in certain circumstances, for example, when:

• you have caring responsibilities (including receiving Child Benefit for a child under 12)
• you’re claiming certain working age benefits such as Working Tax Credit, Jobseeker’s Allowance or Employment and Support Allowance

You need to apply for Child Benefit in order to receive your National Insurance credit even if you choose not to receive a payment. It is important that you apply for any credits you may be entitled to as soon as possible as it is not always possible to backdate them.