Increasing numbers of people are opting to pay extra national insurance contributions (NICs) in an effort to boost their state pension.
It may seem strange for people to willingly pay more tax than necessary but HMRC data shows a total of £392m of voluntary class 3 NICs were paid in the year to March 2023, up from £212m in March 2022 and £172m in 2021.
Experts highlight that many people at or approaching state pension age would have been rushing to meet a deadline to buy extra NI credits before April 2023.
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Under normal rules it is only possible to fill gaps for the past six years but, under a special concession, savers were allowed to go back to 2006/07 provided they made contributions before 5th April 2023.
HMRC phone lines became jammed and the deadline was eventually extended to July 2023 and then to April 2025.
“The surge in voluntary payments of NICs highlights the great opportunity which they present,” says Steve Webb, former pensions minister and now a partner at consultancy Lane, Clark & Peacock.
“At best, voluntary NICs are a relatively cheap way of boosting your state retirement pension and represent excellent value for most people.”
What are voluntary national insurance contributions
Voluntary or class 3 national insurance contributions help people fill gaps in their national insurance record.
This is important as it can increase how much state pension you are entitled to.
You can check your national insurance (NI) record online and call the Future Pension Centre if you haven’t reached state pension age yet and want to fill gaps.
If you have already reached state pension age and want to buy more credits. you need to call the Pension Service.
There have been issues with these phone lines though, with long delays, which is why the deadlines have been extended.
“There have been many complaints from contributors about the problems getting through on the phone to find out what years they can top up and at what price,” adds Webb.
“At present, contributors have to first phone the ‘Future Pension Centre’ at the DWP to find out about filling gaps and then phone HMRC to get a ‘code’ to make sure their payment is correctly allocated.
“Even those who get through this process have often reported long delays between making contributions and seeing their record or state pension forecast updated.”
What difference will extra NI credits make to your pension?
Those wishing to pay for previous years are currently charged £15.85 per week or £824.20 to fill a full historic gap year.
This will typically add 1/35 of the full state pension rate or just over £300 per year, says Webb.
“Anyone who draws a pension for at least three years (or at least four years allowing for basic rate tax) will generally win out from paying voluntary NICs,” he says.
It may not be worth it if you are still working though as you could automatically build up enough credits, so it depends how close you are to the state pension age.
The government has promised to launch an online version of the system which would allow people to top up without needing to make multiple phone calls, but this has not yet gone live.
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