Time running out to boost your state pension

Written by Ben Allman Partner, Ballards

With just under a month remaining until the deadline, tens of thousands of Britons are racing to fill gaps in their National Insurance records, potentially securing thousands of pounds in additional retirement income.

Recent figures from HM Revenue and Customs reveal a remarkable surge in activity, with approximately 23,000 people contributing a total of £27 million in voluntary National Insurance payments within a mere ten-day period earlier this month. This flurry of activity reflects a growing awareness of a rare opportunity that expires on April 5, 2025.

Under the current state pension system, individuals need at least 35 years of National Insurance contributions to qualify for the full payment of £221.20 per week. However, gaps in one’s record—perhaps due to periods of unemployment, time spent raising children, or working abroad—can significantly reduce this amount.

While typically these gaps can only be addressed retroactively for six years, the government has temporarily extended this period all the way back to the 2006-07 tax year. This extension has proven particularly attractive to those in their 40s, 50s, and 60s who have both the means to invest now and the foresight to secure their financial future.

The numbers tell a compelling story. A one-off payment of approximately £800 to £900 can fill a single missing year in your National Insurance record, potentially yielding thousands in additional pension payments over the course of retirement. Each year purchased adds approximately £328 annually to your state pension—meaning ten years of contributions costing roughly £8,200 could generate nearly £100,000 in additional income over a 30-year retirement.

Between April and early February, about 37,000 people contributed £35 million in top-ups online. By February 13th, this had increased dramatically to 60,000 people investing £62 million. As the deadline approaches, HMRC has acknowledged that the overwhelming demand has slowed response times, apologizing for any anxiety this may cause customers.

However, experts caution that this strategy isn’t beneficial for everyone. Younger individuals still have ample time to naturally accumulate the necessary 35 years of contributions. Additionally, those who took time away from work to care for children or elderly relatives may already be entitled to pension credits at no cost.

Tax implications should also be considered, as an increased state pension could potentially push some individuals into a higher tax bracket depending on their other income sources. In such cases, the benefit of buying extra years will effectively be reduced.

For those considering taking advantage of this opportunity before it expires, the process is straightforward. Check your individual state pension forecast online at gov.uk/check-state-pension to determine how much state pension you’re currently on track to receive and identify any gaps in your record. The service allows you to select which years you’d like to fill and make secure payments directly through the platform.

With the April 5th deadline rapidly approaching, now is the time to assess whether this investment in your future retirement security makes financial sense for your specific circumstances.

For more information, please get in touch with Ben Allman at ben.allman@ballardsllp.com.

Disclaimer
This insight does not constitute financial or legal advice. All businesses have different considerations, and you should contact a professional before acting upon any of the information contained in this insight.