DWP and HMRC urgent state pension advice as you could lose thousands

Personal finance experts have explained what you need to do as the hard deadline is just months away

Finance experts are urging people to take action in the next six months or face a shortfall in their State Pension. It follows HMRC and the Department for Work and Pensions encouraging people to act now and check their National Insurance record.

More than 10,000 payments worth £12.5 million have been made through the new digital service to boost people’s State Pension since it launched in April 2024, HM Revenue and Customs (HMRC) has revealed.

People have until 5 April 2025 to maximise their State Pension by making voluntary National Insurance contributions to fill any gaps in their NI record between 6 April 2006 and 5 April 2018.

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “Taxpayers with any shortfalls in their state pension record have been urged by the Government to act now and plug the gap by making voluntary contributions before this golden opportunity to maximise their state pension passes. People can currently plug any shortfalls by backdating their National Insurance (NI) contributions - but the clock is ticking as the deadline to take advantage of this one-off concession closes in less than six months.

“Buying back missed years can be a great way for many people to bolster retirement income as the state pension provides a guaranteed monthly income for the duration of your retirement. Most importantly, that income is currently set to increase year-on-year by at least 2.5% and probably more, because of the triple lock.

“Checking your personal tax account will quickly identify any gaps in your National Insurance record and whether you have enough qualifying years to receive a full state pension – an extremely valuable source of income considering the full new state pension will rise by 4% or £460 a month in April 2025 to almost £12,000. This will become vital in the later stages of life when you may not be fit enough to continue working or have inadequate private pension savings.

“Typically, taxpayers can only backdate their NI contribution history by six years, but the government is currently allowing people to pay to fill gaps on their NI record all the way back to April 6, 2006 – an extremely beneficial move designed to help those affected by new State Pension transitional arrangements. After the April 5, 2025, deadline next year, the system will revert to the normal time limits, which means people will only be able to make voluntary contributions for the previous six tax years.

“Your state pension entitlement is determined by the number of qualifying NI years you have. People typically need at least 10 qualifying years of NI contributions to receive any state pension at all and at least 35 years to receive the full new state pension – though they don’t need to be consecutive years.

“Plugging gaps can be quite an expensive process, so it is important to assess whether you actually need to buy back any missing years. This will depend on how many more years you plan to work, and whether you are eligible for NI tax credits, which fill the gaps, such as those who have been sick, were unemployed or took time out to raise a family or care for elderly relations.

“Plugging gaps in your record is relatively straightforward since the Government rolled out its new NI payments services in April this year – a state pension forecast tool that has been checked by 3.7 million since its launch. People simply need to log into their Personal Tax Account or the HMRC app to not only view any payment gaps but also check if they can plug those gaps directly through the Government’s digital channels. A short survey assesses the person’s suitability to pay online with those eligible to pay directly given a series of options to plug any gaps depending on when someone wants to stop working.

“Calculating whether to top up can be confusing though and ultimately there is no point paying for more years than you need because you won’t get that money back, which is why for some people calling the Government’s Future Pension Service to double check how many years they can buy and whether voluntary contributions really will add to their state pension may be key for those unsure about such a move.

“People who might need to top up include those that took a career break as well as low earners or expatriates living and working abroad. Pension shortfalls and errors that have come to light in the last decade have particularly affected women who gave up work to look after children and widows – and it is now thought many divorcees could also have a State Pension shock awaiting them, which is key keeping tabs on your state pension record is so important.

“Remember, this deadline has been extended a couple of times in the past, which makes it more likely the Government will stick to the April cut-off point this time around. For this reason, those that think they might need to take action should start the process now.”