Deadline to plug the gaps in your NI contributions extended
As the end of the 2022/23 financial year approaches, taxpayers have been running out of time to buy National Insurance (NI) credits to plug any gaps in their record for any missed years of contributions. The good news is the Government has announced an extension to deadline to allow people more time.
Currently, in order to get access to your state pension when you retire, you are required to pay in at least 10 years’ worth of National Insurance Contributions (NICs). And for those wanting to claim the full amount of their state pension, 35 years’ worth of NICs are needed.
Normally, anyone set to receive the new state pension who is missing NI contributions can plug gaps as far back as 2006. However, the Government announced that after 5 April this rule would change and in fact you will only be able to backdate missing NI contributions by up to 6 years. This deadline has since been extended to 31 July 2023, giving people more time to plug any missing gaps. That means, however, if you have missed the odd year or two or have larger gaps where you haven’t made any NICs, now is the time to consider buying back those missing years before it’s too late.
National Insurance Contributions
National Insurance (NI) is an umbrella term for universal health care, unemployment benefits and the public pension program.
National Insurance Contributions (NICs) are a form of tax that employees and employers pay to the Government through payroll deductions. NICs are paid automatically through the PAYE (Pay As You Earn) system, which deducts an amount based on a percentage of your income, and this generally continues until you reach retirement age. Employees are able to make additional voluntary payments to increase the pension amount that they will be entitled to receive.
Act now to plug the gaps
Anyone can have gaps in their NICs. If you were unemployed, raising a family, in education or even if you were not earning enough, you may have periods where no NIC payments were made.
You need to have been paying NIC for at least 10 qualifying years in order to receive any kind of state pension, and you need to have been paying for a full 35 years to receive the full amount possible. This means that if you want to receive your full state pension and you have gaps going back further than six years, now is the time to think about plugging those gaps by purchasing missed years, as you may not have this opportunity again.
The New State Pension is currently worth up to £10,600.20 over the 2023/24 financial year. If you buy back only one qualifying year of the NI at the standard rate of £824.20, this would increase your pension by £275 per year, for life. So, if you can afford to buy back those missing NIC years, it’s a worthwhile long-term investment to consider for the financial security of your retirement.
If you’re thinking about your financial future and would benefit from a free non-committal initial consultation, why not get in touch. We’re currently offering anyone with £100,000 or more in pensions, savings or investments a free review worth £500.