- The current system is run jointly by the DWP and HMRC and includes on-call services for both
- The new website allows buyers to check which years are best for purchasing and paying locally
- Should you consider buying a state pension top-up? Read our guide
State pension top-ups: HMRC takes additional contributions, then the DWP recalculates the projections or payments under the current system
A new online service for purchasing state pension top-ups will be launched in the spring after a flood of complaints that the current system was confusing and took too long to process payments.
The website, currently being developed and tested by the Government, will allow people to check locally which years are best for them to top up and purchase, but will still be able to call and pay offline if they prefer.
Buying top-ups can provide a generous boost to your retirement income if you buy the right years on your register, but the scheme is run jointly by the Department for Work and Pensions and HMRC and currently includes servicing of both.
It was overwhelmed earlier this year when a rush of buyers jammed phone lines ahead of a tight deadline – ultimately forcing the government to extend the deadline twice. This led to a backlog that is still ongoing, according to reader emails received by This is Money.
During the process, people have to figure out which years they want to buy, which isn’t easy due to rule changes and makes filling some gaps pointless.
The government advises people to check with the DWP and obtain a reference number from HMRC before purchasing.
HMRC then takes additional contributions and then the DWP recalculates the state pension projections or payments.
But some people have paid large amounts and waited months for processing, not knowing whether they’ll just sit in the queue or get lost because they don’t receive a receipt or confirmation of the purchase.
They claim government officials provided them no assistance in trying to trace their cash.
The government says the vast majority of top-ups are processed within days, although complex cases requiring specialized caseworkers can take longer to resolve.
Should you buy state pension top-ups?
The state pension is currently £10,600 a year if you are entitled to the full rate.
Top-up prices are now frozen until April 2025, even though the full state pension was increased by 10.1 percent at the start of the year and is also set to rise significantly next year.
You can still benefit from a special concession which allows you to top up or buy additional years of state pension eligibility from 2006/2007, rather than just the usual six years.
However, it can be difficult to work out which years, if any, will be beneficial to you personally, and the government itself and other financial experts warn you to contact the DWP before handing over your cash.
> Read This is Money’s guide to buying state pension top-ups. Further information and DWP contact details can be found below.
> “My £11,500 state pension top-up balance had disappeared for months…”
A spokesman said: “We are building a new online service to enable people to see whether paying voluntary national insurance contributions would increase their state pension and then make payments.”
“The new service is currently being developed and tested to ensure it is easy to use and provides accurate information in a straightforward manner. “We expect it to be ready this financial year.”
The government says most customers should be able to take full advantage of a new online service that HMRC and DWP plan to roll out by the end of the financial year next April.
Once testing is successfully completed, new guidance will be issued on who can use the new digital service and how to do so.
The government adds that the website will contain information to help customers decide in which years they can make up their deficits, based on the available gap years that are most favorable or beneficial. They can then pay their top-ups to their statutory pension online if they wish.
However, it says customers will still be able to contact both DWP and HMRC using existing methods to obtain further information about their national insurance records and state pension forecast and to pay any voluntary contributions.
Former pensions minister Steve Webb said: “One of the big frustrations in the current process is having to battle phone lines not once but twice to top up your state pension.”
“A streamlined online process would benefit both those who enjoy doing things online and those who still want to speak to someone, as it should reduce the number of phone calls.”
Webb, who is now a partner at consultancy LCP and a pensions columnist for This is Money, added: “While a thorough review and audit is right and proper, it would be good to launch this service as quickly as possible.”
How to buy state pension top-ups
The DWP and HMRC provide the following information about the current process.
– Voluntary National Insurance contributions do not always increase your state pension and you should check whether you would benefit from them before making any payments.
– If you have not yet reached statutory retirement age, contact the Future Pension Center for further information. If you have reached statutory retirement age, contact the pension service.
– If you need a reference number to make voluntary contribution payments, contact HMRC.
– People who need to apply for a refund of voluntary contributions can look here: Apply for a social security refund.