The UK State Pensions and voluntary National Insurance contributions – changes from 2023.

We recommend that anyone under the UK State Pension age check their entitlement before July this year.  From 1 August 2023 you can only look at the last six years when paying for gaps in your National Insurance contributions, which could affect how much state pension you receive. The deadline date was originally 5 April, but the government has extended it.

Article updated 6 April 2023

The UK State Pension may form an important part of your retirement income.  Not only is it a secure source of income, but it also increases under the triple lock rules each year – and this continues to apply for people resident in Cyprus, France, Malta, Portugal, and Spain.

There is no automatic right to receive the full pension when someone retires.  Rather the full amount is only paid if someone has paid or receives credits for National Insurance contributions for 35 years.

Usually, the UK State Pension entitlement builds up each year and from the National Insurance contributions deducted from an individual’s salary.  However, if someone has raised children, been unemployed, were employed but received low earning, or lived outside the UK, they may not have accumulated the required number of years of National Insurance contributions or credits to receive a full UK State Pension.

Voluntary National Insurance contributions

It is therefore important to ensure that your records correctly reflect your lifetime position.

For example, did you know that a full-time parent claiming child benefit for a child under the age of 12 is given a National Insurance contribution credit towards their State Pension, even if they were not working?

It is often possible to make a voluntary contribution which has the effect of buying additional years of UK State Pension.

A voluntary contribution costs approximately £800 but adds £275 a year (every year rising with the triple lock) to the UK State Pension you receive. It, therefore, takes under three years of payments to get your money back – after that, it’s pure profit.

Changes from 2023 – deadline extended from April to July

When the ‘new State Pension’ was introduced in 2016, a number of transitional rules were also included.  One of these enabled people to look all the way back to 2006 when buying back years.

The ability to buy back years by looking back to 2006 was scheduled to end on 5 April 2023. After the cut off date, it will only be possible to pay for gaps in your National Insurance record by looking at the past six years. This means that some people could lose out on the opportunity to maximise their UK State Pension for gap years earlier than 2017 – making it very important that people act before the deadline.

Due to the high volumes of people phoning, the deadline for contacting HM Revenue & Customs  has been extended to the end of July 2023 to give taxpayers more time to fill the gaps. But don’t leave it until the last minute or you are likely to not get through in time.

It is therefore important for everyone under the state retirement age to check on their UK State Pension entitlement – which can be done online at www.gov.uk/check-state-pension.  If necessary, you can buy back any missing years to maximise your State Pension both at and into retirement.

Remember, however, that not all voluntary payments boost the UK State Pension, so first ensure that the payment will increase your pension entitlement.

Finally, before starting, note that you will need a Government Gateway user ID and password to check your National insurance record.  If you do not have a user ID, this can be created before you check your record, again through the government link above.