Six arguments against increasing your state pension

The time to purchase National Insurance credits and increase your state pension is drawing near

However, here are some reasons why some people might not find it worthwhile to top up theirs.

You may be aware that the deadline for purchasing National Insurance credits and increasing your state pension is April 5.

Any gaps in your National Insurance (NI) record dating back to April 2006 can be filled during this time.

You can only purchase NI credits for the previous six tax years if you miss the deadline.

Thousands have chosen to increase their state pension by taking advantage of the special window. HMRC reports that 83,000 people, totaling 98 million, have topped up in the last 12 months. Online payments average 1,765.

But not everyone is a good candidate for purchasing NI credits and increasing their state pension. "While filling gaps can often be a great way to secure a higher retirement income at a relatively low cost, there are instances where doing so may not be in someone's best financial interest," says Jon Greer, head of retirement policy at wealth manager Quilter, who spoke to BFIA.

In these six situations, it is unlikely to be worthwhile to top up.

1. You have already made contributions for 35 years

To receive the full new state pension, you must have made National Insurance contributions (NICs) for at least 35 years. It makes no sense to top up if you already have this.

Greer observes: "First and foremost, voluntary top-ups usually offer little benefit to individuals who already have the 35 years of qualifying contributions needed for a full state pension. Their pension entitlement won't be increased by the additional contributions, so they run the risk of spending money that won't be returned.

People in their 50s might have accrued all 35 years of NICs. For instance, a woman who began working at the age of 18 and has paid NICs for 35 years would now be 53.

To find out if you already qualify for the full state pension, you can visit Gov.gov.uk to view your state pension forecast.

2. You work and are young

Throughout their careers, many people will earn all 35 NICs.

It is unlikely that purchasing additional credits will be wise if you intend to continue working and are not close to the state pension age of 66, which will rise to 67 by 2028 and 68 by 2046.

The government's state pension forecast service is another resource you can use. It will inform you of the anticipated amount of your state pension as well as the date on which you are expected to receive it.

It is assumed that you will have 35 years of NICs, even if you do not yet have them, if it states 221p20 per week. This is the amount currently granted under the full state pension.

The forecast also indicates how much you would receive if you retired tomorrow with your current NIC record, which is 160.31 per week, and how many more years you would need to contribute in order to receive the full 221.20.

If you are 45 years old and it states that you need another 10 years, for instance, you may be fairly certain that you will continue to work for at least another 10 years and won't need to spend money on additional NI credits.

3. You qualify for Pension Credit

It probably won't make financial sense to top up if you're eligible for Pension Credit and have a low income.

Head of retirement analysis Helen Morrissey of the investment platform Hargreaves Lansdown says: "You might discover that if you pay for a larger state pension, you lose your eligibility for benefits like Pension Credit that you would otherwise be eligible for.

"You might lose out on thousands of pounds annually because Pension Credit not only supplements your income but also serves as a means of accessing additional assistance.

Greer agrees, stating that those who qualify for Pension Credit in retirement "should tread carefully."

Paying voluntary NI to increase a state pension may only decrease their eligibility for this means-tested benefit, leaving them no better off overall. Pension Credit tops up income to a minimum level of 218.15 per week for single people and 332.95 per week for couples. The same is true for people who might qualify for other income-related benefits, since any raise in pension income might be counterbalanced by cuts elsewhere.

4. You don't feel well

Your health should be taken into account in addition to your income. If you're not likely to live to state pension age or much past it, purchasing NI credits might not be wise.

Those who fill in gaps typically recoup their investment in four years, according to Steve Webb, a former pensions minister and partner at the pensions consultancy LCP.

Therefore, depending on how long you expect to live, it might not be worthwhile to top it up.

The state pension offers a lifelong, inflation-linked income, but people with severe illnesses or shortened life expectancies might not receive enough benefits to cover the initial outlay of voluntary contributions, according to Greer. In these situations, allocating money to other sources, like private pensions, ISAs, or personal savings, may be a more adaptable and effective use of capital.

5. You look after the kids

Gaining NI credits and increasing your state pension without having to pay for them might be feasible.

Morrissey clarifies, "You must first determine whether any of those gaps can be covered by a benefit that comes with an automatic NI credit before you give any money to top up your state pension.

For example, you might not have claimed child benefit even though you were at home taking care of a child. Backdating a claim in these circumstances allows you to get those credits topped off at no cost.

People who are not paying National Insurance because they are unemployed, taking care of family, or on parental leave are eligible for credits.

Grandparents caring for grandchildren is included in this. A parent receiving child benefits may transfer the National Insurance (NI) credit to a grandparent or other qualified family member through these Specified Adult Childcare Credits.

6. Taxes would increase for you

If increasing your state pension would put you in a higher tax bracket, you might want to reconsider boosting it.

Morrissey adds, "You will need to carefully consider whether the top-up is worth your while because you may find that increasing your state pension tips you over a tax threshold."

For example, your state pension would increase by 6.32 per week if you paid 907 to cover the entire 202324 tax year. That's an additional 328.64 over a year. However, since you had other retirement income, such as from workplace pensions, you would only have £179.184 left over if that money was subject to 40% tax.

It would then take four and a half years after the state pension age for you to receive your 907 back.

What to do if you're unsure whether to increase your state pension.

Use HMRC's state pension forecast tool to determine how much you are entitled to based on your age and whether there are any NI gaps you can fill if you're unsure whether to top up your state pension.

Additionally, you can view your National Insurance record via your Personal Tax Account or the HMRC app, where you can complete a survey to determine whether you are eligible to make an online payment.

According to Greer, "not everyone will benefit from voluntary contributions, so it is important to contact the Future Pension Centre (if you are under state pension age) at 0800 7310175. They can provide individualized guidance and tell you if paying more will increase your state pension entitlement."