The State Pension is likely to provide part of the foundation of your retirement income. However, access to the full State Pension isn’t guaranteed, so it’s important that you review your National Insurance record ahead of reaching retirement.

This simple step can help you consider moves to fill any gaps in your record, such as “buying” credits, which could boost the value of your State Pension and help relieve some of your retirement income worries.

Read on to discover how the relationship between National Insurance credits and the State Pension works, and how you might benefit from unlocking its full value. 

The State Pension is likely to be a fundamental part of your retirement income

The current full State Pension has risen to £203.85 a week (£10,600 annually) as of the 2023/24 tax year. Upon reaching the State Pension Age (SPA) of 66 (rising to 67 from 2028), you’ll gain access to a guaranteed monthly income from the government that you’ll be able to utilise throughout retirement.

While the State Pension is unlikely to be enough to provide for all your retirement needs, it does offer the security and protection of the “triple lock”, which ensures its value continues to rise each year in line with the cost of living. So, you shouldn’t underestimate its value.

To gain access to the full State Pension, you need at least 35 qualifying years’ worth of National Insurance contributions (NICs) before reaching retirement. Meanwhile, you normally need a minimum of 10 years of NICs to receive any at all.

You typically accumulate a year of “credit” if you:

• Worked and paid NICs
• Paid voluntary NICs
• Received benefits due to being unemployed, ill, or acting as a parent or carer.

However, if you have gaps in your record and fall short of qualifying years, you may miss out on the benefits of receiving the full State Pension.

If this describes your situation, you may be able to supplement your record by making voluntary NICs – and there is an added opportunity this summer to do so as far back as 2006.

Buying credits now could go a long way towards boosting your retirement income

You may have gaps on your record if you:

• Were employed but didn’t earn enough during a qualifying year
• Were unemployed and did not claim benefits
• Were self-employed but did not pay contributions due to small profits
• Spent time living or working overseas.

Gaining access to the full State Pension could provide your retirement income with a significant boost. So, if you have any gaps, it might be worthwhile considering retrospective contributions.

MoneyHelper reports that:

• Credits cost £179.40 for a year of Class 2 (self-employed) and £907.40 for Class 3 (employed)
• Every additional qualifying year gained towards your State Pension record is effectively worth £302.64 each year (based on 2023/24 rates)
• Buying credits could boost your retirement income by over £5,000 if you lived 20 years past the SPA.

The government’s transitional arrangements offer an extra opportunity to fill gaps — but they come to a close on 31 July 2023

As part of the shift to the new full State Pension in 2016, the government set up transitional arrangements so that those approaching the SPA would not be unfairly penalised by the change. This means that individuals who started their NICs records prior to 2016 can plug any gaps by buying National Insurance credits dating back to 2006.

However, this window closes on 31 July 2023 (following a recent extension of the original April deadline), after which you may only be able to buy credits dating back as far as six tax years.

Accessing your full State Pension could go a long way towards alleviating any lingering retirement income concerns. You can review your record online through the government website to see whether you are in line for the full amount.

7 surprising ways you might have accrued unused National Insurance credits

Before you purchase any NI credits, it may first be worth thoroughly reviewing your record and seeing whether you have any unused benefits you’ve accrued across your working life.

You may have earned credits that you could add to your record between 2006 and 2016, if you:

1. Qualified for, but didn’t claim, Employment and Support Allowance.
2. Proactively looked for work while you were registered as unemployed.
3. Received Statutory Sick Pay and so were not earning enough for a qualifying year.
4. Gained maternity, paternity, or adoption pay and didn’t earn enough in a qualifying year.
5. Cared for a family member under the age of 12, while you were aged between 16 and the SPA.
6. Supported a disabled, ill, or injured person for 20 hours a week or more.
7. Served jury duty while in employment.

By checking this first, you may be able to claim “free” credits, rather than making voluntary NICs.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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