Ability to purchase extra years national insurance contributions

If you pay or are deemed to pay enough years National Insurance Contributions (NIC) you will get a full state pension. If you are short some years you will get less state pension. Up until the 5th April 2025 you can make any year back to 2006 count for NIC by paying extra NIC now.

The following post is an outline explanation of what it’s worth to you by paying the extra NIC, what it will cost, whether you are eligible and how to pay it.

Summary of steps to take

Remember contact must be made with HMRC before 5th April 2025 for back-payments to count.
Remember this scheme has lots of caveats and the right thing to do is very specific, depending on your circumstances so the information below should be taken as a general guide.
Work out in general if its worth while looking at further.
- If you are between 40 & 73 (ish) it is probably worth checking if you have made enough years worth of NIC payments. See here for details.
Work out how many extra years you need to pay, if you can pay them.
Contact HMRC to get payment reference, if possible.
Pay amount required along with relevant reference numbers and information or additional forms.
Contact HMRC, by sending online form, if all of the above will not be complete by 5th April 2025.

In More Detail

The government brought in major changes to the pension system in 2016. As part of the transitional arrangements to ease in the new rules it has allowed people to go back over past years, as far back as 2006, and voluntarily pay NIC for any years that they are not covered for pension contributions in other ways. This ability to go back to 2006 will end on 5th April 2025.

The HMRC Guidance Manual entry dealing with this is NIM72270.
The Legislation dealing with the Class 2 (£160 per year) Voluntary contributions is Para 61B of The Social Security (Contributions) Regulations 2001.
The Legislation dealing with the Class 3 (£825 per year) Voluntary contributions is Para 50C of The Social Security (Contributions) Regulations 2001.

There are 2 main state pension systems, pre & post 2016 systems, and various stages in between with different rules for men & women and for different ages and depending on what you were doing when you were not earning and whether you ever “Contracted Out” for NIC purposes at any time in the past. Because of this, the safe advice is for everybody to set up a Personal Tax Account and check how many years you have that count towards Pension Contributions and then decide if you need to do anything further. The remainder of this guide assumes that not everybody wants to do this and so aims to help you decide how important this might be to you and whether you want to do anything further about this issue.

What is the deadline?

5th April 2025, to go back to 2006. After this you can still go back 6 years, but potentially miss out on up to 11 years.

As some of the steps outlined below could take weeks if not already started you would really need to start the process ASAP to meet the 5th April 2025 deadline.

Is this for you?

If you are a Woman born after 5^th April 1953 or a Man born after 5^th April 1951 then you are eligible to go back to 2006. You could have already started your state pension recently and still be eligible to make back-payments. Anyone born before these dates is already on the old pension system and so these back-payments don’t apply.

There is no minimum age but you had to be working age to pay NIC and the younger you are the more likely it is you will have time to make enough years contributions otherwise, so it becomes less certain that you will gain from making voluntary contributions. Most commentary on this states that it will be most useful for you if you are over 40, but that will depend on your circumstances.

How many years do you need to get a full state pension?

Women born before 6^th April 1950	39 years contributions
Women born between 6^th Apr 1950 – 5^th Apr 1953	30 years contributions
Women born after 5^th April 1953	35 years contributions
Men born before 6^th April 1945	44 years contributions
Men born between 6^th April 1945 – 5^th April 1951	30 years contributions
Men born after 5^th April 1951	35 years contributions

Short answer is that it depends on your circumstances. In general though, and with come caveats, the following chart applies to most people.

As the upcoming deadline only relates to the 35 years scenario we deal with this in the explanations below.

What is an extra year’s NIC contributions worth to you?

If you get to pension age with more than 35 years qualifying as having contributions then an extra year on top of that is worth nothing to you and you would be wasting your money paying any voluntary contributions.

If you get to pension age with less than 35 years qualifying then each extra year should be worth the following to you.

The standard full state pension is, at the time of writing, £221.20 per week.
Under the new pension scheme, if less than 35 years qualify for contributions then your pension will be £221.20 ÷ 35 x (number of years contributions).
Therefore each extra year is worth £221.20 x 52 ÷ 35 = £328.64 per year.
How long you live will decide how much the contribution is ultimately worth to you. Without knowing the future, you have to make an assumption . Your own health, family lifespan traits etc may come into it, but as a general guide we have worked examples on statistical lifespan averages.
According to the ONS the average 66 year old woman can expect to receive 21 years pension and the average 66 year old man can expect to receive 19 years pension. (These aren’t exact pension ages but an average for practical purposes.)
Using these calculations an extra years pension contribution is worth:
- £6,901 over the pension lifetime of a woman
- £6,244 over the pension lifetime of a man

How much will a year’s contribution cost me?

Exact amounts depend on the year being paid but, in general:
If you are self-employed and eligible to pay class 2 NIC then it will cost approx. £160 per year.
If you are not eligible to pay class 2 NIC then you will have to pay the normal voluntary class 3 NIC. This will cost approx. £825 per year. Much more expensive, but still worth it in many cases if you can afford to pay it.
Partial years shortfalls can be made up on a week by week basis.

How does a year count as a qualifying year for Pension NIC contributions?

The obvious answer is any year where you have paid enough employed or self-employed NIC contributions to meet the minimum contributions necessary to qualify. There are other allowances that complicate this so an attempt at a full list is below:

Paying enough class 1 or 2 or 3 NIC to qualify in a year.
Employed and earning at least £6,396 a year(may vary by year)
Self-employed with profits of at least £6,725 a year (‘small profits threshold’)
Claiming universal credit
On jobseeker’s allowance and not in education/working for 16 hours or more every week
On maternity allowance
On income support and providing ‘regular and substantial care’
In a couple and both getting working tax credits (only one of you will get NI credits)
On carer’s allowance
A parent registered for child benefit for a child under 12
On employment and support allowance, or ‘un-employability supplement’ or allowance
Over 18 and Jobcentre Plus sent you on a Government-approved training course lasting up to a year

Not all of the above will be automatically on your record so the first step would be to consider if you need to get HMRC to amend your record to account for this.

Pension Credits

If your State Pension is likely to be your only income in retirement then, under current rules, Pension Credits will top-up any shortfall in pension to almost the same level as a full pension. In this scenario paying extra contributions would be wasted as, overall, nothing extra would be gained.
If your state pension plus any other source of income after state pension age, such as farm profits, business profits, employment income, rental income, private pension income, dividend income or bank interest etc, take your annual income to over £9,500(approx) then you will not be entitled to Pension Credit and you would gain from having extra NIC contributing years.

Inflation

We assume that the rate of State Pension increase will keep up with inflation in these calculations. If it fell significantly behind inflation rates then the benefit of paying NIC now to obtain a better pension in 20 – 30 years’ time would not be as great.

How do I find out if I will have enough contributing years?

You need 35 (usually) contributing years by the time you reach state pension age.

The number of future years need to be estimated by you. This is where your age comes into it. eg if you are 35 and already have 15 years contributions and you assume you will make another 20 years contributions before you are pension age, so making back-payments now is not needed.

The more definitive part of the calculation is working out how many contributing years you have already clocked up.

You can contact HMRC to find out how many years of contributions you have made and how many missing years you can now contribute to in one of several ways:

The easiest way is to use your Personal Tax Account to look up the years that qualify. If you don’t already have a Personal Tax Account you can set up one with HMRC. Their guide to setting it up is here. Please contact us if you need help with this.
If you are currently under state pension age you can contact the Future Pension Centre directly by phone. (If you can get through.)
If you are already getting the state pension, but under the 1951 or 1953 age limit then you can contact the Pension Service directly by phone.
You can fill in Form BR19 and get your state pension forecast by post. Although you are unlikely to have an answer before 5th April 2025 by this method.
You can contact National Insurance General Enquiries in several methods outlined in the link here.
If you worked outside the UK for a number of years you may be eligible to pay Class 2 or Class 3 depending on the exact circumstances. This will need separate contact with the International Pension Centre branch of government. Please contact us for further advice if this affects you.

What do I do after I have discovered I am likely to have less than 35 contributing years?

In theory, you will look up your personal tax account. This will tell you what you need to pay to get the full pension. You then click on through and pay the Class 2 or 3 NIC to bring your pension contributions up to date.

Unfortunately, in most cases, the system either has not calculated the correct amount or does not have specific enough information to you to be able to tell you the correct amount. In these cases you have more work to do.

There are many specific variations, but in general there are 3 options:

If you think you should be paying Class 2 NIC due to self employment income below the compulsory payment threshold or multiple letting landlord income etc, your will need to phone National Insurance General Enquiries with your Tax Reference and National Insurance details to get an 18 digit reference number to enable you to make a payment. With access to your Personal Tax Account it should be possible to calculate the correct amount to pay, but you will still need the 18 digit reference number that HMRC will give you.
If you think you should be paying Class 3 payments then you can either pay using the 18 digit reference number or pay by cheque to HMRC using your National Insurance Number as a reference and including other details in a note.
If you have overseas income in which case you will need to work with the International Pension Centre to get the correct amount to pay as, depending on your history, you may be able to pay either Class 2 or Class 3 even if you were not self-employed. In most cases we can calculate the amount and you can make a payment directly to HMRC using your National Insurance Number with “IC” and part or all of your surname to make up the 18 digit Reference number. You will also need to submit a form CF83 and occasionally, additional forms with this option.
After all is paid you should confirm with HMRC that the years have been paid. The easiest way to do this is via the Personal Tax Account again. HMRC advise that it could take 2 months to update this so this is unlikely to be able to be confirmed before 5th April 2025, but confirming as early as possible should make it easier to correct.

Time is running out

As 5th April 2025 approaches you may find that HMRC phonelines are jammed and some of the above stages take too long.

HMRC recognises this and has provided an emergency request call-back form to complete and send online to start the above process. As long as this process has started then HMRC has said they will enable you to catch up with NIC contributions even after the 5th April 2025 has passed.

Where this form is completed please screen shot the form before you send it and any response after you send it as this may be your only proof that you have submitted this.

If you need any help with any of the steps above please contact us.