Six-month window to top up NI payments for full state pension
© Sturti/iStock Photo Farmers, their families and employees are advised to check for any gaps in their National Insurance (NI) record, as voluntarily paying to fill these may increase their state pension.
Rachel Coates of Cumbria-based accountant Dodd & Co says taxpayers have until 5 April 2025 to fill in any gaps dating back to April 2006.
“Historically, there has been an option to voluntarily pay NI contributions for the previous six tax years, but people currently can go back further than that and address any gaps they may have between 2006 and 2017,” she says.
Check records
“I would urge everyone to check their records, as a little time spent on the internet could bank you thousands of extra pounds over your lifetime.”
See also: Funding later life care – challenges and opportunities for farming families
To qualify for a full state pension – currently worth £221.20 a week – most people need to have 35 qualifying years of NI contributions.
Some individuals may have years where they either made no NI contributions or fell short of the qualifying threshold.
A parent or carer who is not working should automatically get NI credits if they claim Child Benefit and the child is under 12.
However, there might be gaps or shortfalls if people worked part-time, were self-employed and did not pay contributions because of low profits, were ill, or because they took time out of work to look after older children or elderly relatives.
Gaps in an individual’s NI record are filled by paying Class 3 voluntary contributions. This costs £907.40 to cover the full 2023-24 tax year, or £17.45 a week for anyone with a part-year shortfall.
Each additional qualifying year adds an extra £6.32/week or £328.64 a year in state pension entitlement at current rates, so once the pension starts being paid, it takes just under three years to recoup the cost of the voluntary contribution.
Anyone living for 20 years beyond retirement age would get back more than £6,000 in state pension from the initial £907.40 contribution.
Some self-employed people can get a better return by paying Class 2 voluntary contributions, which are at a lower rate than Class 3 and can also be made for earlier years. For example, the Class 2 rate for the full 2023-24 tax year is £179.
Benefits to farmers
Rachel has worked with a number of farming clients who have found it beneficial to top up contributions, including a woman who boosted her state pension forecast by £30-£40 a week by filling in the gaps in her record.
“We did the number crunching that if she lives three years after reaching state pension age then she will get back all of the money she has had to pay [to fill in her NI contributions gaps].
“Obviously, how much it is worth depends on how long you live after drawing your state pension, but if someone gets their pension at 66 or 67 and then lives another 20 years it is a no-brainer.”
Individuals who are most likely to benefit from topping up their contributions are those close to state pension age and who do not have enough qualifying years already, but are looking to stop work soon.
NI contribution checks
The process of checking whether you have a NI shortfall is usually straightforward. Most people’s NI records can be accessed online using the “Check your State Pension forecast” tool at gov.uk (see box).
An improved version of this tool was rolled out in April 2024 after complaints that people were struggling to get through to the Department of Work and Pensions (DWP) to check their forecasts and make voluntary payments.
It allows taxpayers to check if they have gaps in their NI record, calculate if making a voluntary payment would increase their state pension, and make online payments if required.
However, the payment part of the service is not yet available to those who are self-employed, so while farmers can check their historical contributions, they will have to contact the HMRC National Insurance contributions office to get a unique payment reference for any payment to be correctly allocated to their account.
Latest figures from the DWP show that since April 2024 more than 10,000 payments worth £12.5m have been made using the government’s digital service.
The majority of customers (51%) topped up one year of their NI record, with the average online payment being £1,193.
The government has said that after the 5 April 2025 deadline, voluntary contributions will be allowed only for the previous six tax years, in line with normal time limits.
How to check your NI record
The government’s Check your State Pension forecast tool can be accessed via gov.uk or the HMRC app.
Those with a personal tax account need to log in using their existing Government Gateway details. Individuals can register to set up an account.
Alternatively, to request a forecast, contact the Future Pension Centre helpline on 0800 731 0175.
Anyone over 16 and at least 30 days away from state pension age can get their pension forecast by completing a BR19 form either online or on paper.
If a paper form is needed this can be requested from the Future Pension Centre, or can be downloaded and printed.
Completed paper forms should be sent to The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98 1LU.
Option to defer state pension adds to pension amount paid
Some people choose to defer taking their state pension. This entitles them to a higher rate when they do take it.
Those who defer receive a 1% enhancement in the amount of state pension paid, for each nine week period of delay, or about 5.8% for a full year.
For example, someone entitled at state pension age to the full rate, currently £221.20 a week, would receive an extra £12.82 a week by deferring for a full year.
Again, it is important to check the tax implication of this.
Sign up for Child Benefit
Registering for Child Benefit gives a parent NI credits for future state pension purposes.
It also means that HMRC is able to issue an NI number when the child reaches 16 years old.
Tax risk
Before making voluntary NI contributions, advisers suggest it’s worth checking the individual income tax impact of doing so, as some of the resulting additional pension may be taken in income tax.
A higher state pension income can also affect entitlement to means-tested benefits. For example, those claiming pension credit may find that this is reduced if their state pension increases.