UK Pensions

National Insurance Contribution

The government offers UK citizens a basic state pension.

Contributions of National Insurance (NI) are compulsory charges applied to earnings from employment or profits from self-employment above certain minimum amounts. NI contributions fund in part the National Health Service and provide protection against sickness and unemployment. National Insurance Contributions (NIC's) also entitle the member to receive a basic state pension at retirement if enough regular payments are made.

The state basic pension will be paid in full if an individual has been credited with NI contributions for the majority of that individual's working life. However, a reduced state pension or possibly no pension would be payable if insufficient NI contributions have been made. To be entitled to the full state pension an individual must have nine out of ten years of their working life as qualifying years.

For the basic state pension on divorce, an individual may be able to use the NI contribution record of their former spouse to enhance their own state pension up to the single persons maximum.

Your entitlement to the basic state pension and certain bereavement benefits could be affected if there are gaps in your NICs record. You may want to consider filling in the gaps by paying voluntary NICs. Whether it will make sense for you to do so will depend on a number of factors, including the amount you have contributed already and when you reach state pension age.

There could be gaps in your NICs record for various reasons. For example, you may have been:

  • Employed and had low earnings (below the lower earnings limit of £97 for the tax year 2010-2011)
  • Unemployed and not claiming benefit
  • Self-employed and exempt from paying Class 2 contributions because you applied for, and were issued with, a Certificate of Exception
  • Living abroad

It is also important to note that you usually have to make up the shortfall within six years from the end of the tax year for which they are being paid - and you can do this even if you've already reached state pension age.

For advice on how to find out about shortfalls or to make up shortfalls, please talk to a qualified Holborn Assets adviser.