Just 123,000 people making state pension top ups despite looming deadline

Over the last five years only an average of 123,000 people per year have made Class 3 National Insurance Contributions (NICs) which allow them to fill historic gaps in their NI records and receive a higher state pension, according to analysis by Quilter.

Quilter says people aged between 45 and 70 who have gaps in their NI record are most likely to be impacted by the upcoming rule change and should act now.

Under normal rules it is only possible to fill gaps in an NI record up to six years after the year in question, but people have until 5 April 2023 to go back an extra ten years. This is due a special concession that for a limited period people can fill historic gaps in their NI record all the way back to 2006/07.

The rule changes mean that 2016/17 would normally be the earliest year in which NI records could be filled in 2022/23, but until 5 April 2023, people can fill in gaps all the way back to 2006/07.

Further analysis of another previous FOI submitted show that over the last two years on average only an additional 45,000 people have made Class 3 NICs for each of the last five tax years.
People may have gaps in their National Insurance record due to a variety of reasons such as having been employed on low earnings or unemployed but not claiming benefits.

Generally, the new full state pension is paid out to those who have at least 35 years of NI contributions. You can claim the new State Pension at State Pension age if you have at least ten years National Insurance contributions and are: a man born on or after 6 April 1951 or a woman born on or after 6 April 1953. If you were born before these dates, you will get the basic State Pension instead.

According to the most up to date data available from the DWP, as of March 2020, 34% of the over 11 million people who receive the Basic State Pension did not receive the full amount, equating to nearly 3.8 million people.

Similarly, around 805,000 people don’t receive the full New State Pension equating to 55% of the nearly 1.5 million people who receive this type of state pension. However, not all these people will receive less than the full state pensions because of gaps but also due to contracting out.

Jon Greer, head of retirement policy at Quilter, said: “Everyone’s finances are squeezed at the moment and simply having enough money for energy bills and sky-high mortgage costs may be proving difficult. However, for those people that think they might have a gap in their National Insurance record, making a Class 3 National Insurance Contributions can be a very valuable investment if you can find the money.

“In fact, someone with ten missing years could pay a little over £8,000 to fix the gaps and boost their state pension income by £55,000 over a typical 20-year retirement. If you have one or two years missing, then this might only cost you in the region of £1,400 but within just a few years of retirement you’d make your money back and more.

“Once April arrives you will have missed a golden opportunity to fill gaps that if left unfilled could have a material impact on your retirement provision so act now if you possibly can."