A Short Guide to State Pension Top-Ups

If you are approaching retirement, it’s likely that the State Pension will form a significant portion of your future income.

While it probably won’t give you a luxury lifestyle, it can provide a valuable layer of security in your later years, especially if other elements of your retirement plan (such as savings, investments, private pensions, and property) have risks attached.

But what if you have gaps in your State Pension record? Is it worth topping up your State Pension, or could the money be put to better use elsewhere?

How Does the State Pension Work?

First of all, it’s worth understanding what the State Pension will give you:

• The new State Pension (available to anyone reaching State Pension age after 2016) provides an income of £221.20 per week (£11,502.4 per year).This is based on you having a full 35 years worth of contributions.
• This amount increases every year, either in line with inflation (as measured by the Consumer Prices Index) or 2.5%, whichever is higher. While this ‘triple-lock’ is controversial, and may not always apply, it is likely that State Pensions will keep some form of inflationary protection.
• The State Pension age is currently 66. This will increase to 67 between 2026 and 2028 and potentially to 68 and beyond in the years that follow, depending on increases in life expectancy.
• You have to claim your State Pension. It will not be paid automatically. You should receive a letter explaining the amount due, when it is payable, and how to claim it.
• You can defer your State Pension if you wish, although this is less common now, as most people consider the State Pension age the latest point at which they are likely to retire. Your State Pension will increase by 1% for every 9 weeks it is deferred (equivalent to 5.8% per year).
• If you die, your State Pension will stop. However, your spouse or civil partner may be able to claim an increase to their own State Pension.

How Do You Build Up a State Pension?

You can build up a State Pension in the following circumstances:

• By paying National Insurance through your salary or business earnings. This applies to earnings above the primary threshold (£242 per week).
• By receiving National Insurance credits if you are a low earner.
• By claiming child benefit.
• You are unemployed and looking for work.
• You receive Universal Credit.
• You are a full-time carer.
• You receive Employment and Support Allowance or are eligible for it.
• You are on maternity, paternity, or adoption leave.
• You are the spouse or civil partner of a member of the armed forces, and living overseas.
• You were wrongly imprisoned.

You may need to claim National Insurance credits, as they are not always accrued automatically.

You cannot build up National Insurance credits if:

• You are in full-time education.
• You are earning below the lower earnings limit (£6,240 per year).
• You are living abroad (although you may be able to build up credits to the equivalent scheme in your country of residence).
• You are in prison.
• You are not working, and none of the above situations apply (for example, a stay-at-home parent of adult children would no longer be eligible for child benefits and, therefore, would not qualify for National Insurance credits).

You need 35 years’ worth of National Insurance credits to achieve a full State Pension. If there are any gaps in your record, you will receive a proportional amount.

You can request a State Pension forecast at Check your State Pension forecast – GOV.UK (www.gov.uk).

Filling in the Gaps

If you have a shortfall in your record, you may be able to top this up by making voluntary or Class 3 National Insurance contributions.

You can top up your record for up to six years after the tax year in which the gap occurs. This means it’s worth checking your record sooner rather than later, as you won’t always have the option to recover the missed credits.

You can check for gaps and confirm your eligibility for Class 3 contributions at Check your National Insurance record – GOV.UK (www.gov.uk).

Are State Pension Top-Ups Value for Money?

The current rate for voluntary Class 3 National Insurance contributions is £17.45 per week, which totals £907.40 for a full year (based on 2024–25 figures).

While this may seem like a significant upfront cost, it effectively buys you a guaranteed, inflation-protected income for life. For each qualifying year added to your National Insurance record, your State Pension could increase by up to £303.85 per year (1/35th of the full new State Pension of £11,502.40).

At this rate, your contribution could be recovered in just under three years, after which the additional income continues for life – and typically rises with inflation.

By comparison, using £907.40 to purchase a private annuity offering the same guaranteed, index-linked income would likely yield a much lower annual amount. While private pensions offer greater flexibility and potential for inheritance, topping up your State Pension can offer excellent value for those looking for secure lifetime income.

So if you have gaps in your National Insurance record over the past six years, or you are no longer building up credits, it is well worth making voluntary contributions, providing you are eligible.

Please don’t hesitate to contact a member of the team to find out more about retirement planning.

The value of your investments and pensions (and any income from them) can go down as well as up which would have an impact on the level of benefits available