NI contributions pension extension; what it means for your estate planning

 16 March 2023
NI contributions pension extension; what it means for your estate planning

The government have just announced that the deadline for applications to “plug the gaps” in your National Insurance record has been extended. You now have until 31 July 2023 to top up any years between 2006 and 2016 when you did not pay National Insurance. After the July deadline, you will only be able to top up the last six years.

So why is this important? It all hinges on the value of the state pension you will receive. Many of those approaching retirement will have factored in their state pensions as part of their “pension pot”. What they may not realise that if they don’t have the number of qualifying years of paying NI, the amount of state pension they receive will be lower.

Estate planning and NI contributions

There’s also another implication for estate planning married couples. When one spouse dies, the surviving current spouse or civil partner may inherit some of their pension. How much depends on the National Insurance contributions made by the deceased spouse. This is a complex area and not everyone will benefit from a spouse state pension. Have a look at the government site.

For example, your spouse may have raised your children and hence not worked for several years. They may have taken time off, or been unable to work, and so they have not paid National Insurance for the qualifying number of years.

(Just to confuse things, if you received certain benefits then you can receive NI credits for the year/s you claimed that benefit. More info here: )

Inheriting a pension

If you reached State Pension age before 6 April 2016, you may be able to inherit some of your spouse’s pension. What’s more, as the Government website explains:

“If your spouse or civil partner deferred their State Pension and built up an extra amount, you can usually claim the extra State Pension or get a lump sum. You must not have remarried or formed a new civil partnership.”

Mind the gap(s)

To make sure you inherit as much as possible, you or your spouse can “top up” the gaps on your National Insurance records.

First, you need to find out if you have any “gaps”.

  • If you pay your tax online, and/or have a Government Gateway account, you can check this anytime.
  • Your accountant, financial advisor or pensions advisor may also be able to help with this information.

If you do have gaps, you can buy voluntary NI contributions for the years you missed from 2006 onwards. If you buy these for any missing years from 2006-2016 inclusive before the deadline of 31 July 2023, you will pay £824.20 for each year (the equivalent of £15.85 a week). After 31 July, you will not be able to buy contributions for this time period.

Who to contact about filling your NI gaps

Needless to say, this isn’t as easy as it might be! However, help is at hand. You can check your State Pension forecast online or call the helplines. (Just be aware that the reason the deadline was extended was because people couldn’t get through on these lines without very long waits! )

Is it actually worth topping up?

This is where you will need to do some maths (or get your advisor to do it!). Generally, people need between 35 and 40 qualifying years to get a full pension. So if you are missing a couple of NI years and plan to keep on working for many more than that, you may not feel you need to plug the gap now.

If you have NI gaps and your forecast is less than the current maximum of £185.15 per week, you simply need to work out how much the difference is, and how much it costs to top up. Remember that you will potentially be receiving state pension for many years after your retirement. So an investment of £824.20 for one missing NI year could turn into a significant amount extra each week over the next 30 years.

According to a calculator at MSE, topping up 5 years of missing NI will break even after just 3 years (before tax).

Of course, this does depend on how long you live, which you can calculate by using the ONS life expectancy calculator.

Using the calculator, we can see that a 58-year-old woman has a life expectancy of 87 years. That’s 20 years of state pension to enjoy after the age of 67!

If it’s all too confusing, just contact your financial advisor, accountant or estate planning professional to talk through the process.

Note: This is for general information and guidance only. Panthera Estate Planning does not provide regulated advice.

Perplexed by estate planning?

Contact us for impartial, sensible, and informed estate planning advice. We’re always happy to talk!

« Return to Paul's Blog

To put it in a nutshell, Panthera are a very professional company which also believes in the personal touch.

Join Our Mailing List

Sign up to receive our regular newsletter with the latest news and tips on all things Estate Planning

Sign Up Now