The government is extending the deadline for topping up state pension by three months, following a “surge” in demand for the service.
At present consumers can make additional national insurance payments for any missed years, going back to 2006/07 to ensure they have the required number of years to qualify for the full state pension.
However, this was due to end at the end of this tax year (April 5 2023), after which date people would only be able to backdate missed NI payments for the previous six years.
In a written statement the government said this will now be extended by almost four months to 31 July 2023. Those making additional historic payments during this period will also able to do so at the voluntary rate, not the higher rate that was due to be imposed from April.
The statement confirmed that phone lines to both the Department of Work & Pensions and HMRC had been unable to cope with demand. This additional flexibility was given as part of the arrangement for transferring to the new state pension in 2016.
The cost of paying national insurance for one missed year is currently £824.20. This will effectively boost the state pension by around a £275 a year, a figure that will increase each year in line with the triple lock. Pension experts point out that people would only need to live for around three yeas to recoup the upfront cost of paying this additional national insurance.
This move has been welcomed by the pensions industry. LCP partner Steve Webb says: “This is great news for people thinking of topping up their state pension. For most people, paying voluntary NI contributions to deal with a shortfall in their state pension makes excellent financial sense. But it is also important to make sure that extra contributions are right in your individual case, as sometimes additional contributions may not boost your pension.
“People need time to talk through their options with DWP and then make the correct payment to HMRC and this extension to the deadline should give them time to do this. The Government is to be commended for listening to the calls to extend the deadline”.
AJ Bell head of retirement policy Tom Selby adds: “Extending the deadline for Brits to pay voluntary National Insurance contributions to boost their state pension entitlement is a pragmatic and welcome step by the government.
“Thousands of people taking advantage of transitional measures established as part of reforms introduced in 2016 could increase their state pension income by hundreds of pounds a year. But with the original deadline less than a month away, a surge in the number of calls to HMRC led to the real risk of people being caught in a telephone logjam and missing out as a result.
“That would have been a PR disaster for the DWP and inevitably have led to claims for compensation.
“Today’s announcement should help ease the strain on the government’s phone lines and will hopefully provide sufficient leeway to ensure anyone who wants to pay voluntary NI going back to 2006 is able to do so.”
Canada Life technical director Andrew Tully adds: “Even if you have gaps in your record you may be able to fill these for free by making sure you have received credits, for example if you were unemployed, or caring for relatives. You can get a state pension forecast from gov.uk which will show if you are on track, and highlights any gaps in your NI record.”
LCP have developed a simple tool to help people understand their state pension forecast and what this means for the ability to top up. This can be found at www.lcp.uk.com/statepensionboost
