Older people do not automatically receive full New State Pension payments of £221.20 each week when they retire.
Pension Credit – Could you or someone you know be eligible?
The State Pension now provides a regular financial income for 13 million older people across the country, including more than one million retirees living in Scotland. This payment is available for those who have reached the UK Government’s eligible retirement age, which is currently 66 for both men and women, and have paid at least 10 years’ worth of National Insurance (NI) contributions.
However, many people may not be aware that to receive the full New State Pension payment of £221.20 each week, they will need around 35 years’ worth of NI contributions. This is just an average number of years as some people may have been ‘contracted out’ and will need more NI contributions to qualify for the full amount.
To help people understand how NI years impact the amount of State Pension you are due in retirement, former Department for Work and Pensions (DWP) employee, Sandra Wrench breaks it down.
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What is a Qualifying Year for the State Pension?
The ex-DWP employee with 42 years of experience in dealing with the State Pension and benefits, told the Daily Record: “A qualifying year for State Pension can be made up through a combination of earnings, National Insurance Credits (NICs), self employment and voluntary contributions.
“If you are working for an employer, a qualifying year is 52 weeks x the Lower Earnings Limit (LEL) currently £123 a week, so once you have earnt £6396 (52 weeks x £123) you will have achieved a qualifying year.
“This LEL of £123 a week has to be from a single job, so if you had 2 jobs, one earning £60 a week, the other £80 a week, totalling £140 a week, neither job would count because you have to earn at least £123 from a single job, before it can count towards a qualifying year for your State Pension.”
Sandra went on to explain that in the Spring Statement of 2022, the threshold at which you paid NI contributions was increased, so anyone earning less than £12,570 a year did not pay NI contributions. If you earn between £6,396 and £12,570, you do not pay NI contributions but are treated as paying NI contributions.
For those earning less than £6,396 a year, you would have to pay Class 3 voluntary contributions, currently £17.45 a week to obtain a qualifying year.
For those earning over £12570 a year, you have 8 per cent of your earnings deducted for NI contributions. Earnings above £967 a week and you pay 2 per cent in NI contributions.
The LEL of £123 a week increases to £125 a week from April 2025.
Leaving work and qualifying years
If you are thinking of leaving work, and need further qualifying years towards your State Pension, instead of leaving at the end of a tax year, Sandra suggests it might be worthwhile working some months into the following tax year before leaving.
She explained: “In that way you may end up with a qualifying year or part qualifying year for that following year, which will then save you paying a lot of money in voluntary contributions, if you do not get another job, or are not entitled to any NI Credits.
“The more you earn in a tax year, the quicker you obtain a qualifying year for your State Pension.”
Self employed
Prior to 2024, it was only Class 2 NI contributions which counted towards your state pension. Class 4 NI Contributions had to be paid if your profits exceeded the
Lower Profits Limit, but did not count towards your State Pension. Class 2 NI contributions were abolished from 6 th April 2024, and self employed now only pay Class 4 NI contributions at 6 per cent for profits above £12,570.
Profits between £6,725 and £12,570, and you are treated as paying NI contributions.
Profits below £6,725, you do not pay NI contributions, but can still pay Voluntary Class 2 NI contributions at £3.45 a week for a qualifying year for your state pension.
So a qualifying year for self employed for 2024/25 tax year would be £3.45 x 52 weeks, £179.40
From April 2025 the Small Profits Threshold (SPT) increases from £6725 to £6845, and the Lower Profits Limit (LPT) remains at £12570 for the 2025/26 tax year.
NI Credits
Sandra also explained that if you’re not paying National Insurance contributions because, for example, you can’t work due to illness, or you’re caring for a child or an adult, you may be able to get National Insurance credits.
The DWP expert said: “With some benefits such as Child Benefit (CB) for a child under 12, Jobseeker’s Allowance (JSA) or Employment and Support Allowance (ESA), you get National Insurance credits automatically, but there are some circumstances where you have to apply.
“It is important that you apply for Child Benefit even if you choose not to receive a payment to ensure that you receive your National Insurance credits.
“On the CB claim form, in section 4 on Higher Income Earners, at question 62, you can tick the ‘No’ box to claim child benefit to get NI Credits but not get paid the Child Benefit.
“Cases where you have to apply for NI Credits, for example if you care for someone for at least 20 hours a week you may be able to apply for Carer’s Credit. Or if you are looking after a child under 12 who is related to you, you might be eligible for Specified Adult Childcare credits. If you are the spouse or civil partner of someone in HM Forces and you have accompanied them on posting abroad since 1975, you may be eligible for National Insurance credits.”
More details can be found on GOV.UK by searching for NI credits or calling the NI query helpline on 0300 200 3519.
Part qualifying years
Sandra also explained that you could have some earnings in a tax year, so that year could be a part qualifying year, and you could then pay voluntary contributions to make it into a qualifying year for State Pension, if you were not working and not entitled to NI Credits.”
She added: “It’s essential to check your NI record and State Pension forecast on a regular basis. It is easier to rectify mistakes sooner than later. Having read one case where the details on a person’s P60 which she got from her company at the end of the tax year did not match those details held by HMRC, but because she picked up this mistake straight away she was able to rectify this error.”
Best time of year to check State Pension forecast
Sandra also revealed that the best time for people in work to check their State Pension is when your employer issues your new P60 in April/May.
She said this is because your NI contributions should be on your record for the previous tax year (2024/25). For self employed it will be when you submit your tax returns for the previous tax year.
Plugging gaps in your State Pension
People currently have until April 5 to plug gaps in their NI record going back as far as 2006, however, Sandra highlighted how the “last minute dash to pay voluntary contributions for tax years back to 2006” has “not been on the website since the introduction of the New State Pension in 2016”,
However, the DWP has shared a nifty tip to ensure you don’t miss the chance to top-up your State Pension after the deadline has passed.
All you have to do is use the online form to request a callback.
Guidance on GOV.UK states: “If you submit a request by the 5 April 2025 deadline, you will still be able to pay voluntary national insurance contributions after the deadline has passed.”
A Government spokesperson said: “Our new online tool will mean that savers will be able to make top-up payments after the April 5 deadline, provided they complete the call back request form ahead of that date.
“This will enable us to ensure no one misses out, and to suitably manage demand as the deadline approaches.
“We also encourage people under state pension age to check whether it is beneficial for them to pay voluntary national insurance contributions by using our online checker.”
Voluntary Contributions
Sandra explained that before 2015, you could pay Voluntary Contributions for past tax years at the rate appropriate to the tax years in question, so if you paid for tax year 2010/11, you paid the voluntary contributions applicable to the rate for 2010/11.
But since 2015, you can only pay Class 3 voluntary contributions the past 2 tax years at the rate appropriate to those years, any earlier years and you have to pay at the current rate.
The cheapest voluntary contributions to pay will be for the past two tax years, any earlier years are paid at the current rate. After April 2025, you can only pay voluntary contributions going back six years.
If you pay voluntary contributions after you have claimed your State Pension, then any arrears of State Pension due to voluntary contributions will only be backdated to the date of payment of the voluntary contributions, not to when you claimed your State Pension.
- Class 3 Voluntary Contributions are £17.45 a week increasing to £17.75 from April 2025
- Class 2 Voluntary Contributions are £3.45 a week, increasing to £3.50 from April 2025
Working life
Sandra explained: “This is defined in State Pension law as the beginning of the tax year in which you are aged 16, to the end of the last complete tax year before the tax year in which you are state pension age (SPA). You can only use complete tax years towards your state pension. So this gives you some idea what years can be used towards your state pension.
“Once you reach SPA you stop paying NI contributions, so the only way you can increase your state pension after SPA is to delay taking it, known as deferment.
So a person leaving school at age 14 and starting work, could not enter the NI scheme until the beginning of the tax year in which they were 16.”
She added: “You can not use any NI contributions in the tax year in which you are SPA, as you can only use complete tax years towards your state pension. So if you were SPA in March 2025, you could not use any NI contributions in the tax year 2024/25 towards your state pension, although by law you have to pay NI contributions until SPA if you are working.”
Full details about the State Pension can be found on GOV.UK here.
