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NICs and your State Pension

The amount of basic State Pension (and certain other state benefits) you're entitled to is based on your NICs record over your working life from age 16 until State Pension age. This record is made up from NICs paid or credited to you in each tax year. A minimum amount of contributions is required to make each year count as a 'qualifying year' towards your overall contributions record.

• Understanding the basic State Pension

How gaps in your NICs record might occur

There could be gaps in your NICs record for various reasons. For example, you may have been:

How many qualifying years do you need to get the full basic State Pension?

This depends on when you reach State Pension age. If this is on or after 6 April 2010 you'll need fewer qualifying years than at present. Also, from that date the number of qualifying years needed for a full basic State Pension for men and women will be the same, whereas at present they are different. See the table below.

Note that the number of qualifying years you need for a full basic State Pension can be reduced if you get Home Responsibilities Protection (HRP) for years when you have not worked or your earnings were too low to get a qualifying year and you had caring responsibilities.

• Home Responsibilities Protection
• Changes to HRP from April 2010 on The Pension Service website Opens new window

Effect on your basic State Pension if you don't have the full number of qualifying years

If you don't have the full number of qualifying years at State Pension age the amount you'll receive will depend on the date you reached State Pension age and the number of qualifying years you've built up.

Effect of a shortfall in the number of qualifying years on your basic State Pension if you reach State Pension age before 6 April 2010

Effect of a shortfall in the number of qualifying years on your basic State Pension if you reach State Pension age on or after 6 April 2010

From 6 April 2010 the number of qualifying years needed are the same for men and women.

You'll get 1/30 of the full basic State Pension for each qualifying year you have. In practice this means that any number of qualifying years will give you entitlement to at least some basic State Pension.

So if, for example, you had 10 qualifying years you would be entitled to 10/30th of the full basic State Pension.

How do you know if you have a NICs shortfall?

There are a number of ways to find out if you have a shortfall in NIC:

Shortfall letter

You might receive a letter from HM Revenue & Customs (HMRC) ('Shortfall in your NI record') between September and January each year if you have any gaps in your record. The letter isn't a demand - but it will tell you how much you can pay if you want to fill the gaps and how you can pay if you opt to do so.

Get a State Pension forecast

You can check whether you're likely to have a National Insurance contributions shortfall by requesting a State Pension forecast from The Pension Service.

• Getting a State Pension forecast

National Insurance Enquiry Line

You can also ask HMRC's National Insurance Enquiry Helpline on 0845 915 5996 to check your NICs record. They will tell you how much, if anything, your shortfall is, whether you are able to make up that shortfall, and how you can pay if you wish to make the amount up.

If you live or have lived abroad

If you've lived abroad please refer to the later section 'Paying voluntary contributions for periods spent abroad' after reading the rest of this article.

Deciding whether to make up a NICs shortfall

It's up to you whether you make up any shortfall. However, remember that because the number of qualifying years you need for a full basic State Pension will reduce to 30 for people reaching State Pension age on or after 6 April 2010, you'll need to consider carefully whether you need to top up at all. At the same time, you'll need to bear in mind the effect on certain bereavement benefits of not topping up - see the next section on this for more information.

If you're unsure, Citizens Advice or a number of other free organisations may be able to help you - or you could consult a financial adviser (though bear in mind that there may be a charge).

• Find your nearest Citizens Advice office
• Getting help and advice on pensions Opens new window

Bereavement benefits and qualifying years

It's important to note that if you reach State Pension age on or after 6 April 2010 eligibility for bereavement benefits (payable if someone dies to their spouse or civil partner if under State Pension age, and based on the deceased's National Insurance contributions) will remain at up to 39 qualifying years for a woman and up to 44 for a man. You may want to take this into account when deciding whether or not to top up your NICs.

• Bereavement benefits

Deadlines for making up a NICs shortfall

You usually have to make up the shortfall within six years from the end of the tax year for which they are being paid - and you can do this even if you've already reached State Pension age.

For example, voluntary Class 3 NICs for the 2008-09 year have to be paid by 5 April 2015. But the rate may increase if you pay more than two years after the end of the relevant tax year.

However there are some exceptions, as described below.

Voluntary Class 3 NICs for the tax years 1996-97 and 2001-02

For the 1996-97 to 2001-02 years there are special extended limits which mean you can still pay Class 3 NICs for all those years - and at the original rate relevant for that year - provided you pay by:

• 5 April 2009 if you reached State Pension age on or after 24 October 2004
• 5 April 2010 if you reached State Pension age before 24 October 2004

Voluntary Class 2 or Class 3 NICs for the tax year 2005-06

If you reach State Pension age on or after 6 April 2010 and want to pay voluntary Class 2 or Class 3 NICs for the 2005-06 tax year, you can do so at the original rates up to and including the final date for payment of 5 April 2012.

Keeping up your payments in future

If you're not working or getting NIC credits you can decide to make regular voluntary contributions, to ensure that you get a better or full State Pension when you retire.

There are two main ways of paying your Class 3 NICs, both in arrears:

• monthly by direct debit
• quarterly by having a bill sent to you every 13 weeks (if you live in the UK) - you can pay this bill at a bank, Post Office or by Girobank
  

You can download the relevant forms below.

• Go to form CA5603 to pay voluntary NICs Opens new window
• Go to direct debit leaflet and application form (PDF 246K) Opens new window
• Help with PDF files

Paying voluntary contributions for periods spent abroad

If you are living abroad and want to pay voluntary NICs or you want to pay voluntary NICs for a past period when you were abroad, there are special rules.

• Topping up NICs if you live or have lived abroad Opens new window

More useful links

• Changes to the State Pension from April 2010
• Changes to the State Pension on The Pension Service website Opens new window
• Making sure you've stopped paying National Insurance