State pension top up: your go to guide

How much is the UK state pension?

In the 2023/24 tax year, a full UK state pension equates to £203.85 per week, or just over £10,600 per year which provides a good level of guaranteed income, a solid base for any financial plan. To qualify for a state pension, you must have at least 10 qualifying years of National Insurance (NI) contributions, and to receive the maximum state pension, you need 35 qualifying years. You pay National Insurance contributions through work, whether this be as a salaried employee or when you’re self-employed, but may also have qualifying years through other means, for example if you have claimed Child Benefit, or get a Carer’s Allowance. Under current legislation, the state pension increases on an annual basis by the “triple lock” – the greater of average earnings, Consumer Prices Index (CPI) or 2.5%, which ensures that the state pension maintains its buying power in line with inflation. State pension age for most people is currently 66, however, this is increasing to 67 for people born after 6th April 1960, and to 68 for people born after 6th April 1977.

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What happens if I haven’t paid enough National Insurance?

You may have gaps, or part years in your National Insurance record for a number of reasons - you may have been self-employed, or working abroad, employed on low earnings or unemployed and not claiming benefits. You may have gaps in your record if you were “contracted out” and it’s worth first checking if you do have any gaps or part years by creating an online account: check-national-insurance-record. It is possible to top up your state pension entitlement by making voluntary contributions. In most cases, you will need to purchase ‘Class 3’ National Insurance contributions. If you have gaps in your National Insurance record between 6th April 2016 and 6th April 2023, the rate payable is £15.85 per week for class 3 contributions, which was the rate applicable in the 2022/23 tax year. Usually, you have six years to make up these contributions, however, HMRC have recently extended the deadline to 5th April 2025 for making payments up during the period between 2006 to 2017. For contributions outside of 2016-2023, the current rate of £17.45 per week applies, and after April 2025, you may have to pay higher rates, or be ineligible to pay.

How to pay voluntary National Insurance contributions? 

If you are below state pension age, you should speak to the Future Pension Centre, who will be able to help guide you on how much to pay, and how to pay this. You may be able to make a one-off payment online, or pay quarterly, with HMRC sending you a bill every July, October, January and April. Alternatively, you can set up a direct debit, make a bank transfer or pay over the phone. If you’ve reached state pension age, you will need to contact the Pension Service to find out if you’ll benefit from voluntary contributions.

Should I pay voluntary National Insurance contributions?

If you’re approaching retirement, it’s well worth checking your state pension forecast. This will tell you whether you’re on track to receive a full state pension, or whether there are missing years or gaps, although this won’t tell you when these were. If you only have a couple of years missing, and intend to work to state pension age, it may be that you don’t need to top up your state pension, as this will happen as you continue to earn. If you’ve stopped working, and have some missing years, it may well be worth topping up your state pension to the maximum, as this provides a good source of guaranteed income throughout retirement.

The Retirement Living Standards says that a couple wanting a moderate lifestyle in retirement need £34,000 per annum, and therefore having two full state pensions, paying a total of over £21,200, means you’re already 60 per cent of the way to meeting this level of income.

Summary

There are scenarios where topping up your state pension may be to your advantage. If you have 10 years of missing contributions, form April 2016 to the tax year ending April 2023, you may be able to boost your pension by £3,026.40 a year, in return for a one-off payment of £8,242. Based on these figures, within three years you would see the cost returned to you. With average life expectancies for a 66 year old being between 85 and 87, you can expect to receive your state pension for 19 to 21 years, so maximising this where possible may well be a sound investment. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.