The state pension forms the bedrock of a retirement fund and topping it up if you’re not on track for a full one can be worthwhile, depending on your circumstances.
You need at least 10 qualifying years on your National Insurance (NI) record to receive anything under the new state pension system and 35 to receive the full amount.
If you’re not on track for this full amount, you can pay for any missing years with voluntary contributions, while others can get free credits if they couldn't work due to illness, unemployment or caring responsibilities. It’s worth checking if you qualify for credits before paying voluntary contributions.
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You can pay for missing NI years for the previous six tax years. Meanwhile, you can top up after you've reached state pension age.
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However, there are some reasons why topping up your state pension isn’t worth it.
1. You already have 35 years of contributions
If you already have the full 35 qualifying years on your NI record, there’s no point topping up as you’re already eligible for a full new state pension.
Adam Cole, retirement specialist at wealth management firm Quilter, notes: “Those who already have the 35 years of qualifying contributions required for a full new state pension typically have little to gain by making voluntary top-ups. The additional contributions won’t increase their pension entitlement, meaning they risk spending money for no return.”
Those in their 50s may already have the full 35 years of NICs, for example a 53-year-old woman who started work at age 18 and has worked since.
You can check your state pension forecast on gov.uk to see if you already qualify for the full state pension.
2. You are young and working
If you’re nowhere near reaching your state pension age it probably doesn’t make sense to buy extra years just yet.
Instead, use the state pension forecast tool on the gov.uk website to see if you’re roughly on track for the full allowance.
The forecast also tells you what you would get if you retired tomorrow based on your current NIC record and how many more years you’d need to contribute to get the full amount.
Cole says: “If you are young and have many years working ahead of you then it is important not to make the decision [to top up] too early and achieve your qualifying status through the workplace.”
3. You’re eligible for Pension Credit
If you’re on a low income and eligible for Pension Credit, it probably won’t make sense to top up your state pension.
Cole says: “If you are likely to receive Pension Credit or other income related benefits, then any top up to your state pension will impact your ability to claim these in future.
“Pension Credit in particular isn’t just an income source either – it gives you access to a free TV licence (if you are over 75), as well as help with NHS costs. Pushing yourself out of this benefit could be costly.”
4. You’re in poor health
As well as your age, you also need to consider your health. Buying NICs may not make sense if you’re unlikely to live to state pension age, or much past it.
According to Steve Webb, partner at the pensions consultancy LCP and a former pensions minister, those who fill in gaps in their NI record usually make their money back within four years.
So, if you don’t expect to live for four years past state pension age, it might not be financially worth it to top up.
Cole says: “If you are in poor health then you may not benefit from the top up should you pass away during the early stages of your retirement.”
5. You look after children
Sometimes it’s possible to get NI credits which can be used to top up your state pension and, unlike NICs, they’re free.
Credits are available to those who are not paying National Insurance because they are unemployed, caring for family or on parental leave.
This includes grandparents looking after grandchildren who can get Specified Adult Childcare Credits. These credits let a parent receiving Child Benefit transfer the National Insurance (NI) credit to an eligible family member such as a grandparent.
Helen Morrissey, head of retirement at investment platform Hargreaves Lansdown, explains: “Before you hand over any money to top up your state pension, you first need to check whether any of those gaps can be filled by a benefit that comes with an automatic NI credit.
“For instance, you may have been at home caring for a child but not claiming Child Benefit. In such cases, it is possible to backdate a claim and get those credits topped up for free.”
6. You would pay more tax
Another situation where you might want to think twice about topping up your state pension is if it pushes you into a higher tax bracket.
“You may find that boosting your state pension tips you over a tax threshold so you will need to consider carefully whether the top-up is worth your while,” comments Morrissey.
7. The years you want to top up are too expensive
The cost of topping up missing NI years can vary depending on which year you’re paying for, so it can make sense to fill in some years over others.
Cole explains: “You need to ensure the year you are looking to add will make sense from a financial perspective.”
What to do if you’re not sure about topping up your state pension
If you’re not sure whether to top up your state pension the first thing to do is use HMRC’s state pension forecast tool to see how much you are due based on your age and if there are any NI gaps you can fill.
You can also check your National Insurance record through your Personal Tax Account, or on the HMRC app, where you can take a survey to assess your suitability to pay online.
You can also contact the Future Pension Centre (if you are below state pension age) on 0800 7310 175 who will be able to give you guidance and tell you if paying extra will increase your state pension entitlement.
