A financial advisor has exposed a 'cruel' loophole in the Department for Work and Pensions (DWP) rules that forces some people approaching state pension age to pay £17 per week in National Insurance (NI) contributions that do not count towards their retirement payments.
The loophole explained
Mike Croxford, a qualified financial adviser since 2002, writing for consumer champions Which?, revealed that the issue stems from when a person's birthday falls. To claim the full new state pension of £241.30 per week, individuals need 35 years of NI contributions. However, those born at certain times of the year may miss out on having their contributions count, even if they continue working full-time.
Croxford explained that the DWP defines a person's working life for state pension purposes as starting on April 6 before their 16th birthday and ending on April 5 before they reach state pension age. This means that someone reaching state pension age early in the tax year would need to have accumulated 35 years of contributions by the previous April to be eligible for the full amount.
Real-life example
One Which? member shared their situation: they have 34 years of NI contributions and are due to reach state pension age in March, just before the end of the tax year. They discovered that their contributions for the 2025-26 financial year would not count towards their pension.
Croxford confirmed this is true due to the loophole. 'Your birthday is in March and you're employed full time, so you've still had to pay National Insurance for 11 months until you hit state pension age, but can't accumulate a final qualifying year,' he said. 'It's an unfair loophole, but one that means you'll need to buy an additional year of voluntary class 3 contributions at £17.75 a week to get the maximum state pension.'
Impact on pensioners
According to Croxford, the DWP requires 35 years of NI contributions to qualify for the full state pension. Workers must pay NI until they retire, but the cut-off date for counting contributions means those born just before the end of the tax year lose out. If a person has between 10 and 34 qualifying NI years, they receive only a portion of the full weekly state pension, proportional to their number of qualifying years.
Those yet to reach state pension age can check their expected pension amount on Gov.uk.
