State Pension top up

People with gaps in their National Insurance record may be able to pay voluntary class 3 NICs. This can help protect entitlement to contributory benefits, including the basic State Pension. In general, they have to be paid within six years, but there are some exceptions.

In the 2013 Autumn Statement, the Government announced its intention to introduce class 3A NICs – to allow current pensioners (i.e. those who will not be eligible for the single-tier State Pension because they reach State Pension age before it is introduced on 6 April 2016) an option to top up their Additional State Pension record through a new class of voluntary National Insurance contributions (para 1.279). Provision for this “State Pension top up” was made in the Pensions Act 2014, with the details in regulations.

The offer is time-limited – to run between October 2015 and April 2017. The State Pension top up has been set at an “actuarially fair rate”, which means they will cost more than the existing class 3 NICs, which are “heavily discounted” (DLC Deb 27 November 2014 c3). The rates vary by age. The contribution required for an extra £1 pension per week for a person aged 65 is £890. For a 70 year old the rate reduces to £779 and at age 75 the rate is £674. (HC Deb 2 April 2014 c85-7WS). The decision whether to pay will depend on individual circumstances. There is a State Pension top up calculator on Gov.UK.

This note provides an overview of the scheme and some of the issues that have been raised in connection with it. For more detail on the single-tier State Pension, see Library Note SN 6525.