HM Revenue and Customs (HMRC) has recently revealed that over 10,000 payments totalling £12.5 million have been made via a new digital service to enhance people’s State Pensions since its inception in April. Individuals have less than six months remaining to address any gaps in their National Insurance (NI) records dating back to 2006 to optimise their State Pension upon retirement.
Typically, individuals can only make voluntary contributions for the previous six tax years, and after the deadline of April 5 next year, the usual six-tax year limit will be reinstated. In 2023, the former government extended the deadline for voluntary NI contributions to April 5, 2025 for those impacted by new State Pension transitional arrangements, covering tax years from April 6, 2006 to April 5, 2018.
This extended deadline has provided individuals with more time to evaluate their options and make their contributions. Men born post-April 6, 1951 and women born post-April 6, 1953 are eligible to make voluntary NI contributions to enhance their New State Pension, reports the Daily Record.
Some people may be entitled to NI credits instead of having to make contributions, so they should check and consider what is best for them. HMRC stated that further analysis of the online service usage shows that the majority (51%) of customers topped up one year of their NI record, with the average online payment being £1,193.
Pensions Minister Emma Reynolds has made a call to action for those approaching retirement. She said: “We want pensioners of today and tomorrow to enjoy the dignity and support they deserve in retirement.”
She emphasised the importance of being proactive by adding: “That’s why I urge everyone to check if they could benefit by filling gaps before the deadline passes. Using our online tool means only a few clicks could make a huge difference to your future.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, also provided insight into how individuals can maximise their State Pension payments. She advised: “There are things you can do to plug the gaps, including checking to see if you were entitled to claim a benefit (such as Child Benefit) which comes with a National Insurance credit during that time, and seeing if you can backdate a claim.”
Moreover, she highlighted the value of buying voluntary National Insurance credits, noting: “You can also buy voluntary National Insurance credits, which can work out very good value. Generally, you can purchase credits to plug gaps going back six tax years but if you’re a man born after 5 April 1951, or a woman born after 5 April 1953 you can currently plug gaps in your National Insurance record going back to 2006.”
But, before you rush to plug gaps in your National Insurance (NI) record, the pensions expert warns: “It is hugely important that you speak to DWP before parting with any money for voluntary National Insurance credits as they can confirm if you will definitely benefit from buying them. In some instances, such as if you were contracted out for instance, you may not benefit from the extra credits.”
Boosting your State Pension
Check your State Pension forecast online
Head to the ‘Check your State Pension forecast’ page on the GOV. UK website to get an idea of your State Pension entitlement.
You’ll also find out when you can officially retire and start receiving payments.
Claim Child Benefit
Women often miss out on valuable State Pension credits while caring for children at home.
Claiming Child Benefit in your name can help you receive National Insurance credits that count towards your State Pension. In the past, some women have missed out because their partner claimed Child Benefit instead.
Others were affected by the High-Income Child Benefit Tax Charge. Claiming Child Benefit in your name ensures you receive the National Insurance credit.
Specified Adult Childcare Credit
Know your eligibility. If you’re under State Pension age and caring for a family member under 12 while their parent returns to work, you might be eligible for the Specified Adult Childcare Credit. If you find yourself in this situation, you could be eligible for National Insurance credits under the Specified Adult Childcare Credit scheme.
This allows the working parent to essentially transfer their NI credit to you. There are also other circumstances where you can claim National Insurance credits while receiving benefits, such as when you’re off work and receiving Statutory Sick Pay.
Voluntary contributions
If you have the financial means, you can fill gaps in your NI record by purchasing voluntary class 3 NI contributions. Buying a full extra year costs around £800, although partial years will cost less.
Each year purchased gives you 1/35th of a year’s state pension. This means you effectively earn your money back in about three years, making it potentially very good value.
However, it’s crucial to check with the DWP to ensure that buying these credits is worthwhile for you.
You can find more information about filling gaps in your National Insurance record on the GOV. UK website.
Are you eligible for Pension Credit?
Pension Credit is designed to supplement the incomes of the poorest pensioners and provides access to other benefits such as help with heating costs, Council Tax, and a free TV licence for those over 75. The means-tested benefit also grants access to Winter Fuel Payments following the Labour Government’s decision in July to stop issuing the annual heating bill assistance to all State Pensioners.
New claims made before December 21, 2024 that are later deemed successful will also be eligible for a backdated Winter Fuel Payment. To check eligibility for Pension Credit, older individuals or their friends and family can use the online Pension Credit calculator on GOV.UK. Alternatively, pensioners can call the Pension Credit helpline directly at 0800 99 1234 from Monday to Friday, 8am to 6pm.