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Surge in voluntary National Insurance Contributions

Surge in voluntary National Insurance Contributions
Emma Lunn
Written By:
Emma Lunn

There has been a further surge in the amount of voluntary National Insurance Contributions being paid, according to latest figures published by HMRC.

In the year to 31 March 2023, a total of £392m was paid in voluntary National Insurance Contributions compared with £212m in March 2022 and £172m the year before.

Voluntary (‘Class 3’) contributions help people fill gaps in their National Insurance records and build up a full state retirement pension.

One reason for the surge in contributions has been the deadlines for filling gaps going back more than six years.

Under normal rules, it is only possible to fill gaps for the past six years but under a special concession, savers were allowed to go back to 2006/07 provided they made contributions before 5 April 2023.

Publicity around this deadline led to a surge in contributions just before the deadline, with phone lines unable to cope with the demand. As a result, the deadline was initially extended to July 2023 and then again to April 2025.

How much will voluntary NICs cost and what value does it add?

For most people, voluntary NICs represent good value as they are subsidised by the government. Those wishing to pay for previous years are currently charged £15.85 per week or £824.20 to fill a full historic gap year. This will typically add 1/35 of the full state pension rate, or just over £300 per year.

This means that anyone who draws a pension for at least three years (or at least four years allowing for basic rate tax) will generally win out from paying voluntary NICs.

There have, however, been complaints from contributors about the problems getting through on the phone to find out what years they can top up and at what price.

Contributors have to first phone the ‘Future Pension Centre’ at the DWP to find out about filling gaps and then phone HMRC to get a ‘code’ to make sure their payment is correctly allocated.

Even those who get through this process have often reported long delays between making contributions and seeing their record or state pension forecast updated. The government has promised to set up an online version of the system, which would allow people to top up without needing to make multiple phone calls, but this has not yet gone live.

‘Streamline process so more people can benefit’

Steve Webb, former pensions minister and partner at Lane Clark and Peacock, said: “The surge in voluntary payments of National Insurance Contributions highlights the great opportunity which they present. At best, voluntary NICs are a relatively cheap way of boosting your state retirement pension and represent excellent value for most people.

“But too many people have had problems getting through on phone lines or getting their NI records updated. The government urgently needs to streamline this process so that more people can benefit.”