Paying out for voluntary National Insurance contributions now could improve your state pension by up to £4,000 - but it'll cost more if you wait until after 5 April 2019.
Anyone who reaches age after 5 April 2016 and has a gap in their NI payments between the 2006-07 to 2015-16 tax years has until April 2023 to 'plug' the holes by making voluntary contributions. So, is it worth it?
In the new tax year, the amount you pay for voluntary will increase to a more expensive flat rate for all tax years. But, if you pay between £600 and £700 - the equivalent of £100 a week between now and April - you could pay off a missing year in your NI record and secure thousands of pounds of state pension when you retire.
We explain how to check whether you have any gaps in your payment history, and how much you could save by topping up now.
If you're employed, you'll probably pay automatically, with contributions taken from your pay packet before you receive it. For the self-employed, will make up part of the payment you make when you submit your self-assessment tax return. You may also qualify for National Insurance credits if you're out of work in certain circumstances - you can find out more in .
But if there are periods where you haven't made contributions or earned credits, you can opt to make voluntary payments to fill in the gaps, known as Class 3 contributions.
Class 3 contributions are voluntary: they won't be taken automatically by HMRC and you have to choose to pay them for yourself.
You can usually pay contributions for the past six years, and some people can top-up over a longer period.
While you'll still be able to top up past years' NI contributions after 5 April this year, you'll have to pay more for it.
Previously, rates varied year to year, but from the next tax year HMRC will charge a flat rate that is higher than any previous charges.
The table below shows the difference between what you'll pay if you make voluntary NI contributions now at the concessionary NI rates, compared with what you'll pay from 6 April.
|Tax year||Weekly rate||Cost before 5 April 2019||Cost from 6 April 2019||Additional cost|
As the table shows, if you're able to buy top-ups for all of the years with concessionary rates now, you could save up to £639.50.
If you have several years of missing contributions to top up, this will add up to a substantial saving.
Before you decide to go ahead and pay out on voluntary contributions, there are a few things you should weigh up first.
If you reached, or reach, state pension age after 6 April 2016, you'll be on the new single-tier system with a 'full level'. You'll qualify for a full state pension if you have 35 years' worth of , and to get anything at all you need to have 10 years of contributions.
There is a standard 'full' level each year, which starts at £164.35 per week - but you might receive more or less than this.
The previous system gave you options for building up additional state pension or to 'contract out' to pay reduced NI contributions
The amount of state pension you receive is worked out by taking the highest figure from what you would have received on the last day using the old system, versus how much you'd get paid if the new system had been in place for the entirety of your working life.
Plus, even if you do stand to gain an extra £4,000 over the course of a 20-year pension, this will even out at an extra £200 per year, or £16.67 per month - not a life-changing amount, though every little helps.
It's best to consider what other forms of income you'll have during retirement, and whether topping up your state pension is the best thing to do for your financial circumstances.
Those who reached state pension age before 6 April 2016 needed to have 30 years' worth of National Insurance contributions to get the full state pension.
Under the new rules, those who reach after 6 April 2016 must have paid National Insurance for 35 years to qualify for the full state pension - and at least 10 years of contributions to receive anything at all.
Having gaps in your NI contribution record can mean you'll receive less state pension than you expect. To make sure this doesn't happen, you should apply for National Insurance credits if you're out of work due to circumstances such as being on maternity leave, or sickness. Or, you can making voluntary NI contributions to pay for the gaps to be filled.
Technically, nobody needs to pay voluntary National Insurance. It's a decision you can make if you want to ensure that you'll receive the state pension.
You might want to do this if you have any gaps or part-years in your National Insurance record that can be topped up. For most people, this will only be in the past six years.
You can get gaps as a result of being employed on low earnings that don't qualify for income tax, working abroad, being self-employed and earning under the threshold required for Class 2 contributions, or not working for any length of time without claiming benefits.
This includes being off work on maternity leave, or leaving work altogether to raise children, and failing to claim . Doing so will mean you qualify for National Insurance credits to fill any gaps; if not, your NI record will suffer.