The Extended State Pension Deadline and What it Means for You

It has recently been announced that the opportunity to top up your National Insurance record to cover missing years will be extended to 5th April 2025. This will give more people the chance to boost their State Pension if they have any gaps in their record.

So, what does this mean for you, and should you consider topping up your State Pension?

Building Up Your State Pension

To build up a State Pension, you need to accrue National Insurance (NI) credits. Most people pay NI contributions through work or self-employment. You need 35 years’ worth of credits for a full State Pension (currently £11,502.40 for 24/25 tax year). You will receive a proportionate pension if you have any missing years.

If you are not working, you may still receive credits towards your record, for example, if:

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You are unemployed and looking for work. If you are receiving Jobseeker’s Allowance, you will automatically receive credits. If not, you can claim credits through the Job Centre.

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You are in receipt of certain benefits, for example, due to disability or caring responsibilities.

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You are on maternity, paternity, or adoption leave.

You don’t receive NI credits if:

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You are working but your salary is under the lower earnings limit. This can include anyone who receives most of their income via dividends.

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You are living outside the UK.

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You are not working but not claiming any benefits. This includes time spent travelling, being financially supported by a partner, in further education, or in prison.

You can find out more about eligibility here.

You can check your State Pension record online to find out if you are on track for a full pension.

Should You Make Voluntary Contributions?

If you have any gaps in your record, you may be eligible to pay Voluntary (Class 3) contributions.

The cost of this is £17.45 per week. The current State Pension is £11,502.40 for the 24/25 tax year, which is guaranteed and index-linked for life. This is effectively a c. 40% per year return on your investment, making Voluntary NI contributions potentially one of the most effective ways of topping up your retirement pot.

There are some potential risks to the State Pension. Firstly, the rules can (and do) change frequently. Retirement ages have increased, with many people who are working today expecting to wait until age 68 to receive their State Pension. The amount you receive, when you receive it, and the rate at which it increases are all in the hands of the government.

Additionally, you can’t pass on your State Pension when you die, although there are some situations where an extra payment is available.

While it’s important to be aware of these risks, in most cases they will be outweighed by the benefits. You can reduce the risks by building up a private pension pot, which is fully under your control, and setting up life cover to provide for your loved ones if you die.


The State Pension Extension

Normally, you can make Voluntary Contributions up to six years after the missing year. However, it is currently possible to top up your record as far back as 2006. The extension was due to end in July 2023 (previously April 2023), but has now been extended to April 2025.

Additionally, the contribution rates have been frozen, which means that even if you wait until 2025 to top up your record, it won’t cost you any more than it would today.

This will give thousands more people the chance to check their State Pension record and fill in any gaps.

Tips for Planning Your Retirement

If you are eligible, and can afford to do so, it’s a good idea to fill any gaps in your National Insurance record. Your contribution will go much further than if, for example, you were to pay the same amount into a personal pension.

While the State Pension offers a good start in terms of planning your retirement, it’s unlikely to provide a comfortable lifestyle on its own. You should also consider the following:

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If you are employed, it might be sensible to ensure you have opted into your workplace pension scheme.

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If you don’t qualify for a workplace pension, or want to make some additional savings for your retirement, consider setting up a personal pension.

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If you have built up multiple pensions over the course of your employment, it might be worth consolidating them. This makes it easier to keep track of your pot. A financial adviser can help you with this.

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Make sure you review your annual pension statement to check your projected level of retirement income. You can easily adjust your contributions if you are not on track to meet your retirement goals. A pension calculator may be useful.

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Consider building in automatic increases to your contributions. You will barely notice an increase of, for example, 5%, but over the long-term, it could significantly boost your retirement pot.

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A personal or workplace pension can be passed on to your loved ones if you die. You may also want to consider life insurance to provide an extra lump sum. The earlier you do this, the cheaper it will be.

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Remember to account for your other goals. While pensions are highly tax-efficient, they are designed for the very long-term. An ISA or cash account may be better suited to short or medium-term goals.

Please don’t hesitate to contact a member of the team for more information on your retirement options.

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Please don’t hesitate to contact a member of the team to find out more about financial planning.