The State Pension is often a useful foundation when you’re creating an income in retirement. Yet, a survey from Just Group found that a third of people didn’t check their State Pension forecast before stopping work.
Although the State Pension may not be your main source of income in retirement, it is often appreciated for its reliability – providing a consistent income once you reach State Pension Age for the remainder of your life. Moreover, thanks to the triple lock, the State Pension rises each tax year, potentially helping to sustain your purchasing power during retirement.
Therefore, if you’ve been overlooking your State Pension, it may be beneficial to start paying attention to it. Here are three practical reasons to review your State Pension before retirement.
1. The State Pension Age is rising and could be later than you expect
The State Pension Age is the earliest age at which you can begin to claim your State Pension, and it varies based on your birthdate.
At present, the State Pension Age is 66 for both men and women. However, it is gradually increasing. For individuals born after April 5, 1960, the State Pension Age will be incrementally raised to 68. Consequently, the date you can start claiming your State Pension may be later than you anticipate.
While further increases haven’t been announced by the government, there are expectations that the State Pension Age will rise again in the future as life expectancy increases. Indeed, the International Longevity Centre calculates the State Pension Age will need to rise to 71 by 2050 to maintain the current ratio of workers to retirees.
Reviewing your State Pension forecast before you plan to retire can help you avoid a financial surprise if you’re unable to claim it when you initially expected.
2. You might want to fill in National Insurance gaps to increase your State Pension
In 2024/25, the full new State Pension is £221.20 per week, which amounts to over £11,500 annually. However, to qualify for the full amount, you generally need to have made at least 35 qualifying years of National Insurance (NI) contributions. If you have fewer qualifying years, you’ll typically receive a proportionate amount.
If you don’t qualify for the full new State Pension due to gaps in your NI record, you might be able to purchase additional years. This could potentially increase your retirement income.
Usually, a full NI year costs £824 and could add up to £302.64 annually to your pre-tax State Pension income. Therefore, you may not need to claim the State Pension for long before seeing a financial benefit.
Before addressing any gaps, it’s important to consider your retirement plans. If retirement is still several years away, you might reach the required 35 qualifying years naturally, without the need for voluntary contributions.
Typically, you can only fill in gaps in your National Insurance (NI) record for the past six tax years. Therefore, reviewing your State Pension forecast before retiring can help you identify opportunities to increase your income.
If you decide to make voluntary NI contributions, you’ll need to contact HMRC to obtain a reference and determine the exact cost of filling the gaps.
3. Your State Pension could affect your wider retirement plan
Understanding the amount you’ll receive from the State Pension and when you can claim it is crucial for your overall financial planning.
While the State Pension may not be your primary income source in retirement, it can provide a valuable foundation. By incorporating it into your plans, you might discover you’re better prepared for retirement than you thought, or even have the flexibility to withdraw a lump sum from your pension at the start of retirement to fulfil some of your bucket list goals.
Reviewing your State Pension forecast can help you make more informed retirement decisions, including how to utilize other assets to achieve your lifestyle objectives.
You can check your State Pension forecast quickly online
Checking your State Pension forecast is often simple. You can use the government tool here or the HMRC app. You can also contact the Future Pension Centre if you’d prefer to receive the information by post, so long as your State Pension Age is more than 30 days away.
Get in touch to talk about your retirement income
The State Pension is typically just one part of your retirement income. We can assist you in creating a comprehensive retirement plan that integrates various income sources, such as workplace pensions, annuities, investments, property, and more.
Please contact us to talk about your retirement plans and the support we could provide as you prepare for the next chapter of your life.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
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