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Retirement planning
13 December 2023
Author: Punter Southall Aspire

The Extended State Pension Top-Up Deadline and What it Means for You

Do know how much State Pension you’ll get? The amount is largely determined by the number of “qualifying years” on your National Insurance (NI) record. If you miss a year, or leave it incomplete, then you stand to lose out on the best State Pension income in retirement.

There is a way to “top up” missing or incomplete years on your record. This involves looking back over your NI account and making voluntary NI contributions to convert these into qualifying years. Normally there is a limit to how far back you can go on your NI record (6 years).

However, the UK government has repeatedly offered extensions to help people build up more qualifying years - further than 7 years. Below, we explain where the deadlines are currently up to (as at the date of publication) and what these could mean for your retirement plan.

The State Pension top-up extensions

In April 2016 the State Pension underwent an important change. The “new” State Pension was introduced for men born after 6 April 1951 and for women born after 6 April 1953. To help people navigate the transitional arrangements towards the new system, from April 2013 individuals were given the opportunity to pay for any gaps in their NI records between 6 April 2006 and 5 April 2017. The original deadline to do this was 5 April 2023.

However, when it became clear that not everyone had been able to get through to make additional payments, the UK government extended the deadline to 31 July 2023. Over the summer of 2023, however, it was extended again - this time to 5 April 2025.

Why does this matter?

In 2023-24, a full NI year provides £302.64 of State Pension income (pre-tax). When you consider how long retirement might last, an incomplete or missing NI year potentially represents a lot of lost income.

Over 20 years, for instance, the latter could mean £6,052.80 in total lost income from the State Pension. This is without considering the additional loss due to missing out on yearly increases to the State Pension via the “triple lock” system.

By making voluntary NI contributions, however, individuals can start to recover lost/incomplete years on their records. The current extension, to 5 April 2025, is a unique opportunity for many to strengthen their future retirement income.

Should I make voluntary NI contributions?

This depends on your circumstances and retirement goals. Firstly, you need 35 qualifying years on your NI record to claim the full new State Pension (when you reach your State Pension age) unless you have an NI record before April 2016. So, if you have already accumulated enough years, you do not need to worry.

You can check your NI record online, for free, using the UK government’s online portal. You need at least 10 years on your file to be entitled to any State Pension at all. Once you have a clear idea of your NI profile, it is easier to see your options.

It should be noted that paying voluntary NI contributions will not always lead to an increase in State Pension. For example, some people may still have enough qualifying years to be entitled to the full amount even if they have gaps in their NI record.

Things get more complicated, however, for those with a low number of qualifying years on their NI record - especially if they are nearing their State Pension age. Here, there may not be sufficient time to build up the qualifying years you need to complete your record. In which case, voluntary NI contributions may be a viable option.

Why act now if the deadline is in 2025?

To “buy” a full qualifying year for your State Pension costs up to £824. Since this provides £302.64 each year (pre-tax and setting aside any increases due to the triple lock system, under which State Pension increases each year by the highest of inflation, earnings growth or 2.5%), the payment starts paying for itself after the second year.

However, not everyone has £824 readily available to invest in their State Pension. The total cost may be even higher if you have multiple missing or lost years to pay for. By planning ahead now, however, far in advance of the April 2025 deadline, you could start working towards a short-term savings target - setting money aside, gradually, so you can afford them.

It is also worth noting that the current extension (5 April 2025) is a changeable Government policy. A UK general election is due before 28 January 2025, and it is possible (albeit perhaps unlikely) that the deadline could be shortened. If this happens, it could lead to people missing out on opportunities to top up incomplete NI years. By making voluntary contributions well in advance, you protect yourself from this scenario.

As things stand, the State Pension is still one of the most solid retirement income options available to British people for retirement planning. It lasts indefinitely until your death - giving you a steady, predictable income which rests on the taxpayer rather than on investment performance. Under current legislation it also rises each year under the triple lock. Take the opportunity, now, to ensure you are set for the best deal.

To discuss your retirement plans, get in touch with our expert team today.

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