The rules around filling in a gap in your National Insurance (NI) record are changing. From 5 April 2023, you will only be able to make voluntary contributions for the past six years. If you have gaps in your record, filling them in now could boost your retirement income.

There are many reasons why you may have gaps in your NI record, from taking time away from work to care for children to moving abroad. Even if you were working, you may have a gap in your record if you were on a low income or self-employed.

Under the current rules, if you’re eligible, you can make voluntary contributions to fill in gaps between April 2006 and April 2016. However, when the 2023/24 tax year starts, you will only be able to make voluntary contributions for the last six tax years.

As a result, you may have just months left to fill in some of the gaps in your NI record. But why should you?

Your National Insurance record affects how much State Pension you will receive

The number of years you have paid National Insurance contributions (NICs) can directly affect your income in retirement.

To receive the full State Pension, you will usually need 35 years on your NI record. If you have fewer than 35, you will typically receive a portion of the full amount.

For the 2022/23 tax year, the full new State Pension is £185.15 a week, adding up to £9,627.80 a year. So, while it may not be your only source of income in retirement, it’s often an important part.

The State Pension also rises each tax year under the triple lock. The triple lock means that the income from your State Pension will rise each year by the highest of three measures – average wage growth, inflation, or 2.5%.

This makes it a valuable way to maintain your spending power in retirement. As the rise is calculated as a percentage, pensioners that aren’t entitled to the full State Pension won’t benefit as much.

Under the current rules, you can make additional voluntary NI payments to fill in the gaps if you have any. It will cost around £800 to purchase an additional year, but it could boost your State Pension income by £275 a year. As a result, you’d need to claim the State Pension for just three years to make it worth your while financially.

The current State Pension Age is 66. According to the Office for National Statistics in December 2022, the average man aged 66 can expect to live for another 19 years. An extra £275 a year over 19 years adds up to £5,225. For women aged 66, the average life expectancy is two years higher.

So, while it may seem counterproductive to make voluntary contributions as you near retirement, it could mean you receive thousands of pounds more from the State Pension.

How to check your National Insurance record

Before you buy additional NI years, you should make sure it’s the right decision for you. In some cases, buying extra years wouldn’t boost your income in retirement.

You can use the government’s State Pension forecast tool to check when you’ll reach State Pension Age and your NICs record.

Even if you have gaps in your record, don’t jump straight into making voluntary contributions – you should consider your retirement plan first. If you have 30 years on your record but plan to work for another 10 years, you still have an opportunity to add the extra five years you need to receive the full State Pension.

What’s important is that you understand whether you’re on track to receive the full State Pension ahead of the April 2023 deadline. If you have gaps in your NICs record, you can then take steps to fill them if necessary.

If you’ve taken time off work, you may be able to claim NICs, which will mean you don’t have gaps in your record.

For example, you’ll be credited with NICs when you claim Child Benefit until the child is 12. This can help ensure parents don’t face a significant gap in their NI record. Carers claiming the Carer’s Allowance can also receive credits to their NI record.

Understanding what you’re entitled to is important for your financial security in retirement.

Contact us to talk about your State Pension and retirement plans

If you have any questions about whether you should make voluntary NICs and how your State Pension fits into your plans, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.