How UK State Pension Changes May Affect You

Edit: since this article was originally written, the UK government announced an extension to the April 2023 deadline. The deadline is now April 2025.

You may wonder why, as an Irish firm, we’re writing about changes to the State Pension in the UK. But due to the nature of our relationship with and proximity to the UK, it’s more than likely that many of you will have worked and lived there for a time. If you haven’t personally, I can almost guarantee you know somebody who has.

If you or they paid National Insurance whilst living and working there, you may be eligible for some or all of the UK State Pension.

The background

When the new UK State Pension was introduced in April in 2016, it came with a raft of changes. One of these was an adjustment to the requirements needed to receive the maximum State Pension.

Previously, to receive the maximum pension you had to have 30 “qualifying years”. This means at least 30 years in which at least one of the following applied to you:
 

• You were working and paid National Insurance contributions
• You were getting National Insurance credits
• You were paying voluntary National Insurance contributions

 
The number of qualifying years has now risen to 35.

At that same time, a transitional arrangement was introduced to allow people to fill in the gaps in their National Insurance record (similar to PRSI records here in Ireland) dating all the way back to 2006.

You can choose to pay for some, all, or none of those additional years, in order to make up your minimum requirement of qualifying years.

This transitional arrangement is ending on 5th April 2023. After this date, the number of extra years you can purchase will be limited to the last six tax years.

How do National Insurance Contributions work?

There are four classes of National Insurance Contributions (NICs):

• Class 1 contributions are paid by employers and their employees.
• Class 2 contributions are fixed weekly amounts paid by self-employed people.
• Class 3 contributions are voluntary NICs paid by people wanting to fill gaps in their contributions record.
• Class 4 contributions are paid by self-employed people on a portion of their profits.

 
You need at least 10 qualifying years of National Insurance Contributions (NICs) to receive any State Pension, and 35 years to get the full amount. Voluntary National Insurance contributions (Class 3 NICs) can help make sure you have enough qualifying years to get the full State Pension.

A full NI year usually costs around £824 (although the rates vary by tax year) and adds up to £275 each year to your pre-tax State Pension.

Should I top mine up?

Before you make any decisions, you should request personalised information to ensure that it is the right decision for you. It is possible to pay to plug a gap and see no gain, which is why this step is so vital. You should only pay to fill in the gaps if it will benefit you.

You can check your National Insurance record by clicking here, and your State Pension forecast by clicking here. This will help to see how much state pension you’ll get, when you can get it, and whether there are options to increase your payments.

If it transpires that filling in gaps will benefit you, you will need to act quickly before the rules change in April 2023.

How do I buy them?

1. Decide the number of years you wish to buy.
2. Complete the application form. This is called ‘Form CF83’, which can be found on the last two pages of the HMRC NI38 guidance manual.
3. Send these forms to HMRC (His Majesty’s Revenue & Customs).
4. HMRC will confirm the cost and your 18 digit reference number. It is essential to keep your reference number safe. It’s how your payments will be connected to your National Insurance records and tax years.
5. Once you have the reference number, simply set up the payment through your bank.

What next?

The UK State Pension system is undergoing some significant changes, including the age at which you can start claiming your State Pension. It’s important to understand how these changes might impact you. Whether you’re approaching retirement age or are currently receiving a state pension, be sure to speak to a financial advisor or contact the Department for Work and Pensions (DWP) for more information.

With the right information and planning, you can ensure that you’re on track to receive the State Pension you deserve.

If you’d like to discuss your situation and your plans for your pension, please do get in touch with us over email at info@metisireland.ie, or by phone on 01 908 1500.

 
Mary Carney
Financial Planner