As well as your private and workplace pensions, the State Pension could provide an important portion of your income in retirement.
This is partly because the State Pension is protected by the “triple lock” guarantee. This means that the amount you receive will rise each year in line with the cost of living.
Yet, to qualify for the new State Pension, you need to have enough National Insurance credits on your record. If you have gaps in your record – if you stopped working for a period of time during your career, for example – it may be worth considering how you can fill them before your retirement date.
One of the ways you could do this is to buy additional years of credits. But in April 2025, the time frame for which you can buy credits will change.
Read on to find out more about how you could boost your State Pension and why it may be prudent to look into this sooner rather than later.
You need at least 10 qualifying years of National Insurance credits to receive any State Pension
To qualify for any State Pension at all, you’ll need at least 10 years’ of National Insurance credits on your record. To receive the full State Pension, you’ll need 35 years’ worth of credits.
You can accrue National Insurance credits by:
- Making voluntary National Insurance contributions
- Paying National Insurance on your employed earnings
- Receiving National Insurance credits, such as while signed off work sick, claiming unemployment benefits, or caring for a relative.
But sometimes, you might have a gap in your record. This may happen if you take time off work or if you don’t earn enough to pay National Insurance. You can check your State Pension forecast to find out how much State Pension you can expect to receive based on your existing record.
If you do have gaps, you can fill them either by buying additional credits, or by claiming any credits you may be eligible for depending on your circumstances.
You may be able to backdate claims for National Insurance credits if you weren’t working for a period of time
Before you look into buying additional years of National Insurance credits, it’s sensible to consider whether you can claim credits.
You may be able to backdate claims if you have a gap as a result of:
- Maternity leave
- Caring for an elderly or sick relative
- Being unable to work due to illness or injury
- Looking after your grandchildren if they were under 12 at the time.
If any of these scenarios are applicable, you may be able to claim additional credits on your National Insurance record for free.
You can buy additional credits for your National Insurance record, but you may wish to look into this before a key deadline in April 2025
If you can’t fill the gaps in your record by claiming credits, another option is to buy credits.
Ordinarily, you can only buy credits to fill gaps that occurred in the past six years. But until April 2025 you can buy credits to plug gaps in your records from April 2006, provided you reached or will reach State Pension Age after 2016.
It currently costs £824.20 to buy enough credits for a full year, though this may differ if you’re self-employed.
Standard Life calculates that buying one year of credits could boost your State Pension by £275.08 a year. If you start taking your State Pension at the age of 66 and live for another 20 years, your £824.20 investment could add around £5,500 to your total retirement income.
So, buying credits to fill the gaps in your record could offer a significant return on investment over the course of your retirement.
Buying additional credits isn’t suitable for everyone, so consult your planner before you proceed
Though filling the gaps on your National Insurance record may be a sensible step towards preparing for your retirement, it’s not suitable for everyone. Your planner can help you to identify the most sensible steps to take to save towards retirement and ensure your retirement income allows you to achieve your long-term goals.
Our team of independent financial advisers in Lewes is here to support you in planning for your retirement, so that you can feel confident in your financial future. To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pension Regulator.
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