Martin Lewis has warned that a system error affecting self-employed Brits could cost hundreds of thousands of people tens of thousands of pounds in state pension payments. In his latest Money Saving Expert newsletter, Lewis revealed that up to 800,000 people who became self-employed between 2015 and 2024 may have incorrect National Insurance records due to a missing notification step.
How the error occurred
Since 2015, anyone becoming self-employed has been required to notify HMRC separately using a CWF1 form, in addition to signing up for self-assessment. However, a minority of those who registered were unaware of this new process and did not complete the form. As a result, they may have received inaccurate information about their Class 2 National Insurance contributions. If they did not realise the glitch and voluntarily pay the correct amount, they could be left with incorrect gaps in their record, potentially lowering their state pension by thousands.
For those teetering on the edge of the minimum number of NI years required to qualify, it could mean getting nothing at all come retirement.
State pension qualifications explained
To receive a full state pension, you need a certain number of NI qualifying years, which can be earned through employment contributions, self-employment Class 2 contributions, or free credits (typically offered to those on low incomes or who are unable to work). 'Think of each NI year as a token you must gain,' explains Martin. 'On the current system, you need at least 10 tokens to get any state pension at all, and very roughly 35 to get the full new state pension.'
The new state pension is for those who hit state pension age (currently just over 66 but due to rise to 67) after April 5, 2016. It operates on a sliding scale, with the minimum (10 qualifying years) coming in at £58.24 a week or £3,028.48 a year, while the full current amount is £241.30 per week, or £12,548 per year. Anyone above this age will receive the old state pension, currently amounting to up to £184.90 per week or £9,615 a year, though Martin says 'extra bits such as the Additional State Pension can lift that higher.'
HMRC's response and impact
HMRC says that as of the 2024/25 tax year, it has improved its systems to ensure the correct contributions are added even if a CWF1 hasn't been submitted. But while the error has been fixed going forward, it estimates around 800,000 people who started working for themselves between 2015 and 2024 have been impacted — including 160,000 who are already at, or within two years of, state pension age.
What to do if affected
HMRC is advising people not to reach out or submit a CWF1 form retrospectively, as doing so could 'disrupt' its process to rectify the issue. Instead, all those affected will be contacted by post. These letters will direct you to get in touch with the Department for Work and Pensions (DWP), who will explain the impact to your state pension and help you work out whether it's worth paying voluntary contributions to fill any gaps.
Normally, people can only pay voluntary National Insurance contributions for the previous six tax years. However, because this is an HMRC system error, anyone affected will be allowed to fill missing years going all the way back to 2015, paying the original contribution rates rather than today's prices.
If you're already at state pension age, or within two years of reaching it, you should hear from them by summer 2027 at the latest, while the rest will be notified in stages from spring 2027 onwards.
