Martin Lewis has told a listener that paying to fill gaps in a National Insurance record is usually not worth it if you are already on track for the full state pension, but he outlined one exception where it could make sense.
The money expert was answering a question on a BBC podcast from a 36-year-old listener named Holly, who asked whether she should pay to fill two years of gaps in her National Insurance record to bring her total qualifying years up to 10. She had worked abroad for several years and spent some time in education.
In the UK, a minimum of 10 qualifying years on a National Insurance record is needed to claim any new State Pension, while around 35 years are required to receive the full amount. A qualifying year can be built through work and National Insurance contributions, or through credits received when unemployed, unwell, or as a parent or carer. It can also come from living or working overseas, or from paying a reduced rate of National Insurance as a married woman.
What Martin Lewis advised
Lewis began by saying: "That's a really interesting question." He then advised Holly to check her state pension projection on gov.uk to see whether she is predicted to receive the full state pension at retirement.
He said: "The first thing I'd do is I'd go and look at your pension projection. On your pension projection, your state pension projection, which is on gov.uk, are you predicted to be able to get that you will have the full state pension when you retire, which is a very long time away?"
He added: "If you are, I think this is probably overkill, because it's not like once you get to the full state pension, you earn more NI years, you get even bigger than the full state pension. It doesn't work like that."
Lewis observed that many older people complain about already having adequate contributions for their full state pension, asking "why do I have to keep paying National Insurance?". He explained: "It's because National Insurance is a tax in reality. It's also a tax that happens to be demarked as your contributions towards getting a state pension once you are older. So if you are on for the full state pension, then you probably don't need to do this."
The only exception
Lewis went on to describe the one scenario in which filling gaps could be worthwhile. He said: "The only time I would make an exception on that is if you could buy these years really, really cheaply. If any of these are part years - so a part year is where you have almost got all the contributions you need to get a year but you are not quite and it's binary. I know people who have been able to buy a part year for £15."
He noted that a full year normally costs in the region of £900, but added: "If you could buy a part year for 15, 20, hey maybe 50 quid, even at your age, just in case somethng happens in future, as you can only buy back a certain amount - 6 years - I'd be tempted to go, you know what, it's 50 quid, I'm just going to do it, just on the off-chance that I might need it at some point in the future."
However, he cautioned: "But if you are having to pay the full £950 for it, I'd probably be thinking it wasn't worth it. You are so young at 36 for doing this. There are a lot of risks that you're just going to be buying money, throwing stuff away - there are big risks for you that the state pension might become means-tested once you are older."
He added: "We don't know that. I don't think that's going to happen imminently for people retiring now. But you are talking about retiring in 30-35 years. Who knows what will be happening in the UK to state pensions in 30-35 years."
Lewis concluded: "So there are a lot or risks in this in doing it now. If you are on to get the full state pension, I probably wouldn't be doing it - other than if you can get a year really cheaply, so it's beer money-type costs, where you may as well do it just as a safety net in case there's a year where you don't work in the future and you wouldn't be able to get it, and this would be a really cheap way to buy it."
Rules on filling NI gaps
Gaps can appear in a National Insurance record if you do not pay National Insurance. According to the gov.uk website, this might be because you were getting National Insurance credits for less than a full tax year, unemployed and not claiming benefits, self-employed but did not pay contributions because of small profits, living or working outside the UK, employed but had low earnings, or self-employed but did not pay contributions because of small profits.
The Government advises reviewing your National Insurance record to identify any gaps and determine the cost of making voluntary contributions. The gov.uk website states: "If you have gaps in your National Insurance record, check if you're eligible for National Insurance credits before deciding to pay voluntary contributions. Contact HM Revenue and Customs (HMRC) if you think your National Insurance record is wrong."
Lewis recommended that Holly take her time to carefully consider her options and seek guidance from the government before reaching any decisions.
