The Department for Work and Pensions (DWP) and HM Revenue & Customs (HMRC) are rolling out a long-awaited online service to simplify the process of topping up National Insurance Contributions (NICs) for Britons.
New DWP State Pension System
This newly launched online platform is designed to enable individuals to identify and rectify any potential gaps in their National Insurance (NI) record, to ensure they receive the full amount of the state pension.
For millions of Britons, the State pension forms the basis of their retirement income. According to the current rules, you need to have accumulated 35 years' membership of the general scheme to be eligible for the new State pension. A minimum of 10 years is required to qualify for any amount.
However, for many individuals, there may be gaps in their social insurance record, which could significantly reduce their pension. These gaps may be due to a variety of reasons, including periods of unemployment without benefits, years of low income or a stay abroad.
The DWP and HMRC online service aims to simplify the process of acquiring additional years of National Insurance or applying for credits to fill these gaps.
People can log onto the online service via their personal tax account login details. Those who do not have an online HMRC account can register on GOV.UK.
Previously, closing gaps in health insurance records was a tedious process that required two calls. First, individuals would need to contact the DWP's Future Pension Centre to discuss potential top-ups, costs and the impact on their pension.
Then, they needed to phone HMRC to obtain an 18-digit reference number to facilitate payment. Now, the new online service eliminates these inconveniences.
The system will let you know whether to purchase additional years rather than claim credits, as well as showing you how your state pension could increase if you make a voluntary contribution. It will also allow you to buy contributions for the years you need them.
Deadlines and Cost of Top-ups
Originally, the deadline for buying backdated national insurance was set by the government for 5 April 2023. However, the date has been extended twice following an awareness campaign by Martin Lewis, founder of MoneySavingExpert.com. As such, the current deadline is April 2025.
At present, missing years of National Insurance dating back to 2006 can be bought back. After the deadline, you will only be able to go back up to six tax years.
The cost of completing a missed qualifying year is currently £824, which can increase your entitlement to the annual pre-tax state pension by £302.
Although the new system has been widely welcomed, concerns remain about potential bottlenecks. Steve Webb, a former pensions minister and partner at LCP, has expressed concern that a potential flood of applications could overwhelm the system.