With the April 5 deadline fast approaching, individuals have a limited time to address gaps in their National Insurance (NI) record. This change could impact those looking to boost their state pension by making voluntary contributions.
According to DevonLive, many savers may not be aware of the potential consequences if they miss the deadline. It’s crucial to take action now to ensure that pension entitlements are maximised before the opportunity slips away.
The Deadline and Its Impact
Currently, to qualify for the full new state pension, individuals need a minimum of 35 qualifying years of National Insurance contributions. If people have fewer than 35 years, they can fill the gaps with voluntary contributions to boost their entitlement.
However, this opportunity will be limited after April 5. After this deadline, the ability to make voluntary contributions will be restricted to covering gaps only from the last six years.
Russell Gous, editor-in-chief of TopMoneyCompare, has highlighted the specific risks for people living abroad. Expats are particularly vulnerable as many spend long periods working abroad and may not have made enough qualifying contributions in the UK. Gous emphasised that
Many expats assume they’ll qualify for the full state pension, only to realise too late that gaps in their record mean they receive much less than expected.
For those living overseas, checking your NI record is essential – he cautioned
Gous also noted that
Paying voluntary NI contributions can be one of the best returns on investment, as even a small top-up could significantly boost pension payments over time.
Voluntary Contributions and Their Impact
For individuals who have fewer than 35 qualifying years, the option to pay voluntary National Insurance contributions is available. It costs £17.45 to purchase a week’s worth of NI credits, or £907.40 for a full year.
Each year of voluntary contributions can add £328.64 to the state pension, which compounds over time.
For example, if someone buys one full year of contributions and lives 20 years beyond the state pension age, they will have received £6,500 more in state pension for the £907.40 investment.
The deadline is particularly crucial for people who have gaps in their NI records between 2006 and 2019. After April 5, the opportunity to fill these gaps will be lost, and individuals will only be able to make contributions for gaps within the last six years.
Expats: Additional Challenges
Expats face additional complexities. In addition to the deadline, they may also encounter challenges regarding the value of their state pension in foreign currencies.
Exchange rate fluctuations can reduce the value of their UK pension payments depending on the country of residence, meaning expats should factor in how far their pension will stretch in their location.
The decision isn’t always straightforward, especially for those relying on their UK pension in a foreign currency. Exchange rate fluctuations can reduce the value of payments, so expats should factor in how far their pension will stretch in their country of residence – said Gous.
With only a short time left to act, Gous emphasised that
Expats should act now to avoid losing out. The worst-case scenario is waiting until it’s too late and being locked out of the chance to boost your pension for life.
Example of the Gap Impact
For example, someone who worked and paid National Insurance from 1990 to 2006 but then took a career break and only resumed work in 2015 would only have 26 qualifying years in 2025.
In this case, after the April 5 deadline, they will not be able to fill the gap from 2006 to 2015 and will need to continue paying National Insurance for another nine years to reach the full state pension amount.
However, if this person reaches state pension age before the nine years of contributions are completed, they will need to find another way to plug the gap, as they won’t be paying National Insurance through their work in most cases.
Given the looming deadline, Gous is stressing the urgency of acting before time runs out.
Those considering a top-up should get advice, check their options, and make sure they’ve submitted their request before the deadline closes – he concluded.
