Please note since the above video was filmed, the deadline has since been extended to the 5th of April 2025
Your state pension is a valuable thing – it’s currently protected by the triple lock, which means it should increase every year by the highest of three measures: average earnings, CPI inflation or 2.5%.[1] Consequently, the state pension for the 2023/24 tax year has increased by an astonishing 10.1% to just over £10,600 a year. This means that if you missed any years of National Insurance payments, you could be missing out on a potentially guaranteed income return of 33%. If this applies to you, it’s also worth noting that you only have until the 5th of April 2025 to rectify this.
Your National Insurance record
To qualify for the full state pension, you need roughly 35 qualifying years of national insurance payments. In most cases, you acquire these simply by paying National Insurance on £12,584 of salary across a tax year.[2] You can also be given National Insurance credits if you’re raising children or, in some cases, if you have a disability. If we take the current state pension, then each year is worth a 35th of £10,608 in guaranteed income until you die: around £303 a year.
Many individuals, though, have gaps in their National Insurance record. They might have spent time abroad, taken time out of work or had a year where they received a low level of income. The first thing you need to do is check your National Insurance record. If you go onto Gov.uk and log in to your Government Gateway account, there is an area that allows you to view your National Insurance record.[3]Here, you’ll be able to see any gaps you might have and how much it will cost to purchase or ‘fill’ a year you have missed. A full year of voluntary National Insurance currently costs £907.40.[4] This effectively means that this is what you need to pay to generate a secure income of over £300 at retirement age or, rather, the equivalent of an annuity rate of 33%! When you compare this with current annuity rates of just over 3%, it’s a phenomenal investment. You’ll only need to survive three years past state retirement age before you are into pure profit.
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How do you go about filling the gaps?
Once you’ve established that you do have gaps in your record, you need to work out whether it’s worthwhile to purchase them. We’ve already worked out that monetarily it’s generally a good trade, but your age could have an impact on this. The younger you are, the more time you have to fill the gaps by working. It might be a good general rule, for example, to say that this generally applies to people over 50. Although, if you are younger than this, it’s still worth checking.
I’m in my thirties and recently discovered that I had a gap in my National Insurance record from 2010, which would only cost £50 to fill. This was due to the level of NI I had paid in that year. I decided this was more than worth it. It was equivalent to an annuity rate of over 600% and you never know what might happen. It provides more flexibility in the future if I ever wanted to take a year out, for example. The value of making voluntary contributions does vary from person to person though. If you are unsure as to the benefit of purchasing more years, you can contact the Government’s future pension centre for a bespoke calculation[5]. They should tell you what it would be worth in your personal circumstance prior to shelling any money out.
Once you’ve worked out that you’d definitely like to make voluntary contributions, you’ll have to call HMRC and let them know which years you would like to make voluntary contributions for. This can be a bit of a nightmare; the automated system will quite often cut you off and until you get through, you can’t move forward. It took me seven attempts to get to speak to a person and I had to call first thing in the morning – unfortunately you just have to persist. They will give you an 18 digit reference number and you can then make the payment online or by bank transfer.
There is one huge caveat here, though – you can currently fill gaps as far back as 2006 but this is coming to an end on the 5thst of April 2025.[6]After that point, you will only be able to back fill for the six previous tax years, so this really could be your last chance.
There you have it – a possible annuity rate of 33% and one of the best investments you may ever come across, simply by picking the phone up to HMRC.
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Editorial policy
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Saltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
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