Interactive Investor

Thousands could lose £60,000 state pension boost over 20 years if they don’t act now

6th March 2023 11:14

by Jemma Jackson from interactive investor

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Plugging National Insurance gaps could be good idea, as interactive investor experts explain.

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Thousands of savers could be missing out on the opportunity to boost their state pension by £60,600 over 20 years unless they act now and buy voluntary National Insurance contributions, according to calculations by interactive investor.

Buying an extra 10 years of National Insurance (NI) contributions would cost £8,242 for employees, but they only have until 5 April to act.

That’s because under normal rules, it is possible to fill gaps in a NI record up to six years, meaning savers can plug gaps going back to 2016-17 at present. However, there are special rules allowing eligible candidates the opportunity to go back a further 10 years (to 2006-07), so long as they do so before the 5 April 2023 tax year-end deadline.

This arrangement is only available for people who will claim the new state pension and reach state pension age on or after 6 April 2016.

Buying extra years involves paying what are known as ‘voluntary class 3 NI contributions’. At present, voluntary class 3 NI contributions cost £15.85 a week or £824.20 for the year.

With each lump sum adding up to 1/35 of the full state pension, one year’s worth of voluntary NI contributions boosts your payments by £5.29 a week or approximately £275 over the year.

interactive investor calculates that somebody purchasing 10 years of NI contributions at the cost of £8,242 (10 x £824.20) could boost their state pension by almost £61,000 over a 20-year retirement, £30,000 over 10 years, and £15,000 over five years.

This is based on the new full state pension payment of £10,600 for the 2023-24 tax year. The calculations do not factor in inflation, so the potential boost in state pension payment is likely to be a lot higher.

Purchasing six years of NI contributions at the cost of £4,945 could translate to additional state pension of £36,000 over 20 years, £18,000 over 10 years, and £9,100 over five years.

Even purchasing one additional year of NI contributions at the cost of £824 could result in a significant uplift in state pension - £6,100 over 20 years, £3,000 over 10 years, and £1,500 over five years.

Impact of voluntary NI contributions on state pension payments over different time periods at retirement

Additional NI contributions

How much those additional NI contributions would cost

What you could get (Additional state pension over 5 years)

What you could get (Additional state pension over 10 years)

What you could get (Additional state pension over 20 years)

Purchase 1 additional year





Purchase 6 additional years





Purchase 10 additional years (expires in April)





Source: interactive investor

Calculations are based on new full state pension of £10,600 per year from 2023-24 tax year (does not include inflation)

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Rampant inflation, which is being felt most acutely by the amount we spend on energy bills and groceries, continues to weigh on finances, but if you can afford to do so, plugging gaps in NI could pay dividends when you retire. Even purchasing a single year of NI contributions at the cost of £824 could turbocharge your retirement income to the tune of £6,060 over 20 years - and greater longevity means that more and more of us would be alive to receive the bumper benefit. The sum would be even higher once inflation is factored in.

“Those with gaps in their NI dating back to more than six years are in a race against time to fill them, as the window to do so closes on 5 April. Most of us will rely heavily on the state pension to fund a comfortable existence at retirement, so it is well worth doing if you have the means to do so - and the benefit of doing so would grow further the deeper you get into retirement.

“If you are unsure if you have any gaps in your NI record, you can check this through the government website.

“It has never been more important to pay attention to changes affecting the state pension  - even if you are not near the state pension age. Changes to rules on voluntary NI contributions and rumours that plans to increase the state pension age from 66 to 68 could be brought forward could significantly reduce quality of life at retirement for those caught unawares.”

When plugging NI gaps isn’t suitable

Alice Guy, Head of Pensions & Savings, interactive investor, says: “Paying extra voluntary National Insurance contributions can be amazing value if you’ve got gaps in your record. You’ll only need to live for four years to claw back the extra contribution and you’ll be seriously in the money if you survive for another 10 or 20 years. However, there are a few things to watch out for and paying voluntary National Insurance contribution isn’t suitable for everyone. It’s important to check the government website to see if you have gaps in your National Insurance record before you make additional contributions.

“There’s no point buying additional contributions if you already have, or are likely to have, 35 years of National Insurance contributions as you’ll already be entitled to a full state pension. You may have built up more years than you think as you can get National Insurance credits for some years you haven’t worked, like caring for children under 12 years old, or caring for a relative if you receive carers allowance.

“There are some circumstances where you may not be able to plug the gap for missing contributions, for example, if you were contracted out during those years, which was the case for some older workers with certain pension schemes. It worth ringing the DWP helpline to check.

“In extreme cases, if you survive 20 years, you may be able to boost your state pension by £96,960 for an original extra National Insurance contribution of only £13,187. The actual sum you receive could be even more as the state pension goes up with inflation over time.

“You’ll also have to pay income tax on your pension income, depending on your other income so you could receive slightly less in your pocket.”

Note: to qualify for the full new state pension, men and women each need 35 years’ of National Insurance contributions, or NICs. This is currently £185.15 a week (£9,630 a year) but will rise to £203.85 a week (£10,600 a year) in April this year after the triple lock guarantee granted pensioners a bumper 10.1% increase.

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