The Department for Work and Pensions (DWP) has unveiled new guidelines to help people increase their State Pension payments.
Those who reached the State Pension age between April 6, 2010 and April 5, 2015, but who do not receive — or are not expecting to receive — a full basic State Pension may be able to boost their money by paying up to six additional years of voluntary Class 3 National Insurance voluntary contributions dating back to 1975.
As reported by the Daily Record, this is in addition to the opportunity you may already be given to pay voluntary contributions for some of the last six tax years.
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The DWP has advised that paying these voluntary contributions is not appropriate for everybody, and is dependent on personal circumstances.
Before making any payments, you should look for further information and advice.
Here is a roundup of the important information about National Insurance voluntary contributions.
Who could the guidance help?
The DWP guidance is aimed at:
- men born between April 6, 1945 and April 5, 1950
- women born between April 6, 1950 and October 5, 1952
What are voluntary contributions?
People in work give some of their earnings to the UK Government, so that once they retire they can claim regular payments in the form of the State Pension.
This money paid to the government is referred to as National Insurance contributions.
If you are unable to make enough contributions in one tax year, you might be able to pay voluntary contributions to up your State Pension amount.
Paying additional voluntary contributions for past years
It may be possible for you to pay as many as six extra years of voluntary contributions dating back to 1975, so long as you
- reached State Pension age between April 6, 2010 and April 5, 2015, and
- already have 20 qualifying years, including any full years of Home Responsibilities Protection (HRP)
What is a qualifying year?
This refers to a tax year in which you paid, or were credited with, enough National Insurance contributions for it to be added to your State Pension pot.
National Insurance contributions are paid if you are in work, care for others, or claim specific benefits.
What is Home Responsibilities Protection?
This guarded the National Insurance record of carers for the first time they spent looking after children under the age of 16, or a person with a disability or health condition, for 35 hours per week or more — as well as approved foster carers.
It was superseded in April 2010 with a weekly National Insurance credit to count towards the State Pension.
Can I pay voluntary contributions for any years when I paid the married woman’s rate?
According to the DWP: “You cannot pay voluntary contributions for any tax year where you had chosen to pay the married woman’s reduced rate for the whole of that year.”
How much do voluntary contributions cost?
The weekly rate is currently £15.85, or £824.20 for a full year, though the exact cost varies from year to year.
You are not required to pay for a whole year if you have already paid some contributions or have some credits for the tax year you want to pay for.
Is there a time limit for paying additional voluntary contributions?
You have six years from the moment you reach the State Pension age to take advantage paying voluntary contributions.
How much more extra basic State Pension could I get?
Each additional year you pay for will boost your basic State Pension by 1/30th of the full basic State Pension. The full basic State Pension is £141.85 a week from April 11, 2022 and a 1/30th increase is around £4.73 a week.
Voluntary contributions cannot boost your basic State Pension past the full rate.
When would my basic State Pension increase from?
The voluntary contributions will increase your basic State Pension from when your payment is received - it cannot be backdated to when you reached State Pension age.
Things to consider carefully before paying voluntary contributions
It is important to note that rules relating to the State Pension changed in April 2010 to make it so that you only require 30 qualifying years to be eligible for the full basic State Pension.
Additionally, many of the rules regarding Bereavement Benefits, which are paid to your spouse or civil partner once you die, have also been altered.
Bereavement Benefits were superseded by the Bereavement Support Payment starting in April 2017, and voluntary contributions will not be used to qualify for this benefit.
The DWP has warned that not everybody who is able to pay voluntary contributions would benefit from doing so, stating: “You need to check whether you would be better or worse off if you paid voluntary contributions.”
The online guidance has some examples of circumstances that might mean you would gain little or no benefit from paying voluntary contributions.
These include:
- an improved basic State Pension may reduce any income-related benefits, for example Pension Credit or Housing Benefit, that you or your partner currently get or may get in the future
- an improved basic State Pension may mean you pay more tax, because State Pension is taxable
- you may be able to use contributions from your late spouse or civil partner, or former spouse or civil partner to improve your basic State Pension - so you may not need to pay extra voluntary contributions
- Bereavement Allowance and Widowed Parent’s Allowance have been replaced by Bereavement Support Payment for new claimants from April 2017. Voluntary contributions will not be used to qualify for this new benefit
Your decision to pay voluntary contributions may also be affected by:
- your life expectancy
- the date you and, where appropriate, your late or former spouse or civil partner reach State Pension age, and
- the number of qualifying years you have
If you have not yet claimed your State Pension, you can get a provisional State Pension assessment.
If you think you might benefit from paying voluntary contributions you can phone the Pension Service on 0800 731 0469.
The DWP guidance advises: “It is important to consider your own circumstances carefully before you pay. There is no automatic right to a refund if, after paying, you decide you have made the wrong choice.”
Contacting the Pension Service
The DWP will contact HM Revenue and Customs (HMRC) on your behalf to find out if there are any gaps in your National Insurance record.
They will then write to you to confirm how many years of voluntary contributions you might be able to buy and explain the process for paying them, if that is what you decide to do.
When seeking advice or further information, always have available:
- your full name and current address
- your date of birth
- your National Insurance number
- your previous addresses and the dates you lived there (including any time spent living abroad)
- if you are a married or in a civil partnership, you will need the name, date of birth and National Insurance number of your husband, wife or civil partner
- details of any other benefits you are receiving or claiming
- details of any Child Benefit you received in the past, so DWP can check if Home Responsibilities Protection was entered on your record
You can get more general information on the basic State Pension here and bereavement benefits here.
More detailed information on voluntary contributions can be found on GOV.UK here.
