The Department for Work and Pensions (DWP) has released new guidance to help certain people boost their State Pension income.
If you reached State Pension age between April 6, 2010 and April 5, 2015, but are not receiving or expecting to receive a full basic State Pension, then you may be able to increase the amount you get by paying up to six additional years of voluntary Class 3 National Insurance voluntary contributions for years going back to 1975.
This is in addition to the opportunity you may already have to pay voluntary contributions for some of the last six tax years.
The DWP advises that paying voluntary contributions is not right for everyone as it depends on your personal circumstances and you should seek further information and advice before making any payment.
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?
When you work you pay part of your earnings to the UK Government, so that when you retire you may get some regular income from the State Pension.
The money you pay is called National Insurance contributions.
If you do not have enough contributions in a tax year, you may be able to pay voluntary contributions to improve your basic State Pension.
Paying additional voluntary contributions for past years
You may be able to pay up to an additional six years of voluntary contributions to cover years going back to 1975, if 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?
A qualifying year is a tax year in which you have paid, are treated as having paid, or been credited with, enough National Insurance contributions for it to count towards your State Pension.
You pay National Insurance contributions while you are working, caring for others or claiming certain benefits.
What is Home Responsibilities Protection?
Home Responsibilities Protection protected the National Insurance record of carers for the time they spent caring for children under 16, or for a sick or disabled person, for at least 35 hours a week - and, from 2003, approved foster carers.
Home Responsibilities Protection was replaced 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?
The DWP guidance states: “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 cost is £15.85 in 2022 to 2023, or £824.20 a year for each complete year that you buy, however, the cost may change each year.
You may not need 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 up to six years from the date you reached State Pension age to pay voluntary contributions under this opportunity.
How much more extra basic State Pension could I get?
Each extra year you pay for will increase 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 increase your basic State Pension above 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
State Pension rules changed from April 6, 2010 and one of the changes means that you will only need 30 qualifying years for a full basic State Pension.
Most of the rules for receiving Bereavement Benefits, which may be payable to your spouse or civil partner when you die, have changed.
Bereavement Benefits have been replaced by Bereavement Support Payment since April 2017 - voluntary contributions will not be used to qualify for this benefit.
The DWP warns that not everyone who can pay voluntary contributions will benefit from paying them.
It said: “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.
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