You have to pay National Insurance contributions for 30 years to receive the full basic State Pension. In certain instances, you may have received National Insurance credits instead of paying National Insurance contributions to protect part or all of your National Insurance record.
Either way, if you have a National Insurance contribution record of less than 30 years, your basic State Pension will be proportionately reduced. In other words, if you’ve paid (or received) **Pension Credits for 15 years you’ll get the half the total amount.
If you don’t qualify for the maximum basic State Pension, you can boost the amount you’ll receive if you’re prepared to pay extra. You have the option to ‘buy’ additional years National Insurance contributions (officially called ‘class 3 National Insurance contributions’). In this way, you effectively increase your National Insurance contribution record which, in turn, should increase your basic State Pension.
You can buy additional National Insurance contributions:
- To cover any of the previous 6 tax years plus the current year.
- For an additional 6 years for any tax year from 6 April 1975. However, you can only take advantage of this additional concession if:
- You’re retiring no later than 5 April 2015
- You already have a minimum of 20 ‘qualifying’ years (that means you have already paid, or have National Insurance credits, for 20 years)
Generally, boosting your pension this way can be a good idea, but there are some reasons why you might not choose to do this. For example:
- If you’re entitled to Pension Credit this will usually give you more than the full basic State Pension and, because of means testing, your entitlement to Pension Credit may be reduced by some or all of the increase to your basic State Pension
- If you’re a married woman paying reduced National Insurance contributions, then you can’t pay for any year where you paid reduced National Insurance contributions for the whole year
- If the extra years you could buy still won’t be enough to provide a higher income than you’ll receive by claiming the State Pension payable to you in respect of your Spouse/Civil Partner, then it’s clearly not worthwhile
To find out if it might be worthwhile for you to consider boosting your basic State Pension this way, The Pension Advisory Service has a planner that can help you decide: Voluntary NI contribution planner
It also contains the details you need to help you obtain a forecast of your anticipated State Pension entitlement.
Note: The government has signalled its intention to move to a flat rate pension that would include both the basic State Pension and the State Second Pension. It has said that people who boost their National Insurance contributions will not suffer, but precise details of the new arrangements are not known at this stage.
What’s more, the government intends to introduce a new class of National Insurance voluntary contribution in October 2015 to allow current pensioners, and people retiring before the new flat rate pension is introduced, the option to top up their Additional State Pension, so do bear this in mind and look out for more information from the government nearer the time.
National Insurance Credits: If you’re unable to work, and therefore unable to pay National Insurance contributions, you could receive National Insurance weekly credits for the basic State Pension and the Second State Pension. To qualify you need to meet certain conditions.
** Pension Credit: Pension Credit is a means tested benefit introduced in 2003 to help pensioners on low incomes who have some savings. There are two elements to Pension Credit: Guaranteed Credit and Savings Credit.