State pension: should you buy National Insurance credits to boost it?

If you think you may have a shortfall in National Insurance credits, it is possible to buy them to boost your state pension – but is it worth it?

In most cases, you can get a full state pension if you have 35 years' National Insurance contributions. But, if you don’t have the full amount by the time you stop working, you may be able to plug the gap by buying National Insurance credits to boost your state pension.

Even if you have a personal pension, most people under save and underestimate how much they need for a pension, meaning a state pension could be nice to have as additional income.

But are the costs associated with boosting your state pension worth it and can everyone do it? 

How much extra state pension can I get?

The full state pension is currently £185.15 a week, but if you have gaps in your National Insurance record – which may happen if you have had a career break, taken time out to raise a family but not registered for child benefit, had low income or been unemployed but not claimed benefits – then you will not get the full amount. And if you have fewer than ten years’ of National Insurance payments, then you will not get any state pension.

But, say, if you paid £826, via what is known as “class 3” contributions, then this could buy you an extra £5,500 in retirement – that’s £5.29 per week or £275 a year over a 20 year retirement.

You currently have until 5 April 2023 to buy voluntary National Insurance credits to plug any gaps between April 2006 and 2016 – but after that, you can only plug gaps going back six years.

There are exceptions to this, however, if you contracted out. If you contracted out of the additional state pension then you may not be entitled to a full state pension even with 35 years’ National Insurance contributions.

Should I buy NI credits?

If you’re at or near state pension age, your state pension forecast is less than £185.15 a week and you do not think you will continue working, then plugging the gap by topping up could make sense. 

To help you decide if it is a good idea to boost your state pension with voluntary National Insurance contributions, take a look at the page created by actuarial form LCP – where you answer some simple questions to see if it is right for you.

You can also get help from the government’s Future Pension Service.

Before you hand over any money, make sure it is worthwhile. 

For example, can you backdate a claim for a benefit you were entitled to that comes with an automatic NI credit? Check how many years’ National Insurance you already have and how many more years you will work? You can check your National Insurance record via the government.

According to Steve Webb, the former pensions minister, it is also not worth plugging the gap if you are in your 40s and can work for many more years. 

And if you’re a grandparent looking after grandchildren, don’t forget, you can also apply for a “specified adult childcare credit” free of charge and gain National Insurance credits.

If you opted out of receiving child benefit to avoid paying the High Income Child Benefit Tax Charge, then you will have missed out on National Insurance credits. It is a good idea to register for them as soon as you can (just say no to the payment) to accumulate future credits. And, if you are working, then you can instead pass the National Insurance credits to grandparents if they take on childcare and are not working.

You can backdate the child benefit for up to three months.

Webb suggests that if you can, pay voluntary contributions at Class 2 (self-employed) rate rather than Class 3 (employed) rate, which is cheaper.

“Be careful to top up the ‘right’ years; for most people who would not otherwise get a full state pension, paying for a year from 2016/17 onwards (when the new state pension came in) will boost your pension and make sense, but paying for older years may not do so,” Webb adds.

And finally, if you have a very short life expectancy, then it may not be worth it.

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