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National Insurance and state pension

By Ian Robinson

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National Insurance and state pension

Find out how your National Insurance contribution record affects your state pension entitlement.

State pension is available only to people who have paid, or been credited with, enough National Insurance contributions.  

The number of years' National Insurance contributions needed to qualify for full state pension changed in April 2016. 

NICs and full state pension entitlement

Previous pension rules (until April 2016)

Anyone reaching state pension age on or after 6 April 2010 had to build up 30 years' worth of NICs to get a full state pension. 

New pension rules (after 2016)

From April 2016, the number of qualifying years required for full state pension increased to 35 for both men and women. At the same time, state pension changed from a two-tier system (basic state pension and additional state pension) to a single-tier system.    

Find out more: state pension explained – a full round-up of what you need to be entitled to a state pension 

State-pension age rises

The state-pension age for women has changed. For women born after April 1950, it will rise over an eight-year period, until November 2018, when the age for both men and women will be 65. 

State-pension age for men and women will increase from 65 to 66 between April 2018 and April 2020, then to 67 and eventually 68.

National Insurance – Class 3 voluntary contributions

If you're unlikely to qualify for full state pension because you haven't made enough National Insurance contributions, it's possible to top up your contributions in some circumstances.

Making voluntary Class 3 NICs allows you to fill gaps in your National Insurance contributions record. These are currently (2016-17) £14.10 a week, so a full year's worth of National Insurance contributions costs £733.20. 

Find out more: National Insurance rates – learn about the different types of contributions and how much you can expect to pay

You can normally go back a maximum of six years to fill National Insurance contributions gaps. In all cases, the maximum number of additional years you can buy is limited to six.

Calculating the benefit of making additional NICs is quite complicated and depends on the qualifying threshold when you reach state-pension age, as well as the number of years NICs you will have paid or been credited with. In all cases, it is worth getting a state-pension forecast from HMRC and advice from the Pensions Advisory Service before taking action.

Class 3A National Insurance contributions

A new type of voluntary contribution has been available since October 2015 for those who will have reached state pension age by 6 April 2016. Unlike normal NICs, these are made in a one-off lump-sum payment. 

Making them will allow you to boost your state pension by up to a maximum extra of £25 a week. The idea is to bring the state pension you receive into line with the new single-tier state pension that began on 6 April 2016 for people who reach state pension age after that date. 

For those aged 65, an extra £1 a week (£52 a year) of state pension income will cost £890. Increasing your state pension by £25 a week (£1,300 a year) will cost £22,250.   

The cost of Class 3A NICs falls with age (like an annuity). For those aged 70, an extra £1 a week will cost £779; for those aged 75, it will be £674; and for those aged 80, it will be £544.    

Are Class 3 and 3A voluntary contributions worth it? 

Any Class 3 contributions you make in retirement will take three and a half years pay off - meaning that you've earned more back in state pension than you paid out. Unfortunately, you only have a six-year window to make voluntary Class 3 contributions once you have reached state pension age. 

The break-even point for Class 3A contributions is more complex, as it depends on your age, but if you can benefit from either scheme you'll usually be better off filling in any gaps in your NICs first, as it is cheaper to do so.  



You'll also need to think about income tax, as any voluntary contributions you make will come out of taxed income (meaning you've already paid tax on them). Any extra income you receive from an increase to your state pension will, however, be subject to income tax. 

If your annual income is below £11,000 in 2016/17, or £11,500 in 2017/18, you will not need to pay any tax on any increases to your state pension. But if an increase to your state pension pushes you over these thresholds, you'll have to pay tax. 

  • Last updated: December 2016
  • Updated by: Tom Wilson

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