
Is “buying” additional UK State Pension credits a good idea?
As you approach your retirement, you might wonder what it holds for you and, more specifically, for your income.
Your retirement income will likely be drawn from various streams, such as private and workplace pensions, investments, property, and other savings.
As a UK citizen based abroad, one area you might not have considered is your UK State Pension. Yet, gaining access to it might provide your retirement income with a useful boost.
There’s currently a window of opportunity to fill more gaps than usual in your National Insurance (NI) record. Recently extended to 5 April 2025, this could allow you the potential to maximise the amount you receive from your UK State Pension.
If you have gaps in your NI record, here’s what you need to know and why you might want to consider making catch-up contributions – sooner rather than later.
The UK State Pension gives you access to a guaranteed income throughout retirement
The current full UK State Pension is £203.85 a week or approximately £10,600 each year for the 2023/24 tax year and is available once you’ve reached State Pension Age (SPA). This is currently age 66 but will rise to 67 from 2028.
Eligibility for the full State Pension is reliant on you having accrued at least 35 qualifying years’ worth of NI contributions (NICs) before reaching retirement.
You usually accumulate a year of “credit” if you have:
- Worked and paid NICs
- Paid voluntary NICs
- Received government benefits due to being unemployed, ill, or having acted as a parent or carer.
The rules surrounding the State Pension differ slightly if you opt to receive it overseas
There are two major ways living overseas could affect your State Pension.
- Working overseas has meant you haven’t made your annual NI contributions and gained qualifying years, which has led to gaps on your record.
- You may not benefit from the State Pension’s “triple lock”, which protects it from inflation by increasing its value year-on-year by the highest of three key metrics. If you opt to take your State Pension while living abroad, it might not benefit from this protection.
On the UK government’s website, you can find a full list of countries that qualify for annual increases in the State Pension.
Hong Kong is one of the countries unlikely to benefit from the “triple lock”. This means that if you opt to take your State Pension while living in Hong Kong, you’ll receive the same amount year-on-year.
If you ultimately decide to move back to the UK for your retirement, you’ll likely benefit from the “triple lock”.
Unbiased reports that the State Pension could rise by more than 17% between April 2022 and 2024. So, it is important that you investigate whether you still benefit from these increases.
Meanwhile, if you have gaps in your NI record, you can typically make up to six tax years of catch-up NICs. Luckily, there is currently a window of opportunity to make further retrospective payments due to a UK government scheme known as the “transitional arrangements”.
If you have any worries about your potential income during retirement, gaining access to the full UK State Pension could provide you with a useful boost. It could benefit you not only financially, but also by giving you added peace of mind.
The UK government has extended its transitional arrangements to 5 April 2025
The UK government launched the new State Pension on 6 April 2016 alongside a window for those affected by the changes to make catch-up contributions. In effect, this means that you can retrospectively pay for NI credits dating back between 2006 and 2016.
This window is an extension of the typical six tax years of catch-up contributions you can normally make, which means if you qualify, you could fill significant gaps in your records.
The window was originally due to close on 5 April 2023, but has since been and it is now closing on 5 April 2025.
The benefits to your retirement income provided by gaining the full State Pension could be significant.
MoneyHelper reports that:
- Every qualifying year you add to your State Pension is effectively worth an additional £302.64 each year (based on 2023/24 rates)
- Credits cost £179.40 for a year of Class 2 (self-employed) and £907.40 for Class 3 (employed)
- Buying credits might boost your retirement income by more than £6,000 if you lived 20 years past the SPA. This is a pretty good investment return!
Buying credits to gain access to the full UK State Pension goes a long way to assuage any retirement income worries. Although, before you decide to part with any funds, you might want to check if you have any unused NI credits you can claim.
7 surprising ways you might have accrued unused NI credits
There are many ways beyond making NICs that could see you qualify for NI credits. You might have unexpectedly accrued credits that you could use to fill in gaps in your record between 2006 and 2016, if you lived or worked in the UK and:
- Received maternity, paternity, or adoption pay but didn’t earn enough in a qualifying year.
- Served on a jury while in employment.
- Searched for work while being registered as unemployed.
- Qualified for, but opted not to claim, Employment and Support Allowance.
- Supported an ill, injured, or disabled individual for 20 hours a week or more, or were the primary carer for a child under the age of 12.
- Received Statutory Sick Pay and didn’t earn enough for a qualifying year.
- Relocated with your spouse or civil partner overseas as part of their British armed forces service.
Reviewing your current NI record is straightforward and simple. You can access your record online through the government website and assess whether you have gaps to be filled or any unclaimed credits.
Get in touch
Gaining access to the full UK State Pension could boost your retirement income. However, the process can be complicated by living and working overseas.
If you are considering making catch-up contributions and want to know if it’s the right move for your retirement plans, you should reach out for advice by emailing us at info@bmpwealth.com or calling +852 3975 2878.