How to increase your state pension amount - and when it’s worthwhile doing

Spending £957 to secure an extra £359 a year for life could be an attractive deal for anyone worried about their retirement income - but there are different pros and cons to weigh up.

That is roughly what filling a missing year in your National Insurance record could deliver at current rates.

You could recover the cost in less than three years of receiving the extra state pension, before tax.

But paying is not always worthwhile. Some gaps can be filled for free, while others will make no difference to your pension.

How does the calculation work?

Your state pension depends on your National Insurance record, built through work, credits and voluntary contributions.

The full new state pension is £241.30 a week in 2026/27. For someone below the full amount, an extra qualifying year generally adds one thirty-fifth of that: around £6.89 a week, or £358.50 over 52 weeks.

Voluntary Class 3 contributions cost £18.40 a week this tax year, so buying a complete missing year at that rate costs £956.80.

Steve Webb, partner at pension consultants LCP, says: “For many people who are set to be short of a full state pension, the option of paying voluntary contributions can be good value.”

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At those figures, the cost is recovered in around two years and eight months of receiving the extra pension, ignoring tax and future increases.

If all the extra income is taxed at 20 per cent, the annual gain falls to about £286.80. Breaking even then takes roughly three years and four months. Higher tax rates can extend that further.

The clock starts when you receive the additional pension, rather than when you pay. Future pension increases could shorten the payback period.

Will filling a gap actually help?

Start with your state pension forecast and National Insurance record on GOV.UK. Check both what you have already built up and what you could receive through future contributions.

Charlene Young, head of technical at AJ Bell, says: “Before paying voluntary NI, check whether you need to. Younger people are likely to build up enough qualifying years through future work, while some gaps can be filled for free through NI credits.”

Someone expecting to reach the full pension through work or credits may gain nothing by buying an earlier missing year.

You normally need at least 10 qualifying years for any new state pension. Those whose records began after April 2016 need 35 for the full amount; earlier records involve transitional calculations.

Young adds: “The next step is to check that buying a missing year will actually increase your state pension. This can be particularly important if you were contracted out under the old system, as voluntary contributions do not always automatically increase your entitlement.”

If you are close to the full rate, an extra year may deliver less than the headline £359.

Could you fill the gap for free?

National Insurance credits can protect your record during periods spent caring or claiming qualifying benefits.

Parents registered for child benefit for a child under 12 can receive credits, including if they opt out of payments.

Grandparents and other eligible relatives below state pension age who care for a child under 12 may qualify for Specified Adult Childcare credits. These transfer credits from a child benefit claimant who does not need them, with their agreement.

Check credit entitlement before paying. A partially completed year can also cost much less to finish than buying a whole year.

Some self-employed people with low profits qualify for cheaper voluntary Class 2 contributions, currently £3.65 a week.

When might paying not be worthwhile?

A higher state pension can reduce means-tested benefits, including pension credit, potentially wiping out some or all of the gain.

Webb also urges caution where someone has a short life expectancy or pressing financial needs, such as expensive credit card debt.

There is another tax consideration from April 2027. The new Pension Tax Allowance will reduce tax for eligible pensioners, but gradually withdraws as total income rises above the full new state pension.

An increase in pension income could therefore reduce that relief.

What should you check before paying?

You can normally fill gaps for the previous six tax years. For a gap in 2020/21, the usual deadline is 5 April 2027.

The price depends on the year and how much is missing. Class 3 payments for the previous two tax years generally use those years’ original rates. The online forecast service can show whether paying will help, the cost and whether you can pay online.

For help checking the effect on your entitlement, contact the Future Pension Centre if you are below state pension age, or the Pension Service if you have reached it. HMRC handles contribution queries.

Before transferring money, establish what the specific year will add, whether credits could cover it, and how tax or benefits affect the amount you keep.

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