It may seem like a long way off, but it’s important to start thinking about your pension at an early age.
The new full state pension is £179.60 per week. The actual amount you get depends on your national insurance record. Your National Insurance record before 6 April 2016 is used to calculate your “starting amount”. It’s part of your new state pension.
Your starting amount will be the greater of the amount you would get under the old state pension rules (which includes the basic state pension and the additional state pension) or the amount you would get if the new state pension had been in place at the start of your working life.
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If this sounds like something you haven’t considered yet, you’re not alone. A recent survey of 1,000 people by Opinium on behalf of Hargreaves Lansdown found that more than a third (34%) of people aged 45-54 have no plan in place for their remaining working years. .
This compares to about a quarter of 35-44 year olds and 25-34 year olds who had no plans for the period between age 50 and retirement. Some 42% of people aged 45 to 54 said they planned to continue in their current job and work full time, reports the Daily Record.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “These results indicate a worrying lack of planning among those closest to retirement about how they plan to spend their remaining working years. The pandemic may well have played a role in this with the economic upheaval potentially causing chaos for people’s retirement planning, with many older workers retiring early after being made redundant.
“It’s also possible that the investment market volatility we saw earlier in the pandemic has impacted people’s pensions, causing them to put off their retirement plans a little longer.”
She added: “Retiring working part-time is often a better way to handle such a huge change from a financial and emotional well-being perspective.
While this is encouraging for those with a work or private pension, for many who have retired or have not reached the minimum £10,000 requirement for automatic enrollment, a state pension may be their best option for retirement income.
However, eligibility is not automatic. The state pension is a contributory payment and in 2019 data from the Department for Work and Pensions (DWP) revealed that of the 1.1 million people applying for the new state pension, just under 500 000 (44%) receive the full amount of £179.60 per week.
The amount of state pension people will receive depends on how long they have contributed to National Insurance (NI).
In October 2020, the UK government raised the state pension age to 66 for both men and women and plans to raise it to 68 over the next few years. You will need at least 10 qualifying years on your NI record to get a state pension, but it doesn’t have to be 10 consecutive qualifying years.
This means that for 10 years, at least one of the following applies to you:
- you were working and paying NI dues
- you received NI credits for example if you were unemployed, ill, a parent or carer
- you were paying voluntary NI contributions
If you have lived or worked abroad, you may still be able to get a new state pension. You may also be eligible if you have paid reduced rate contributions for married women or widows – find out more about this on the GOV.UK website here.
You will need 35 years of qualification to receive the new full state pension if you do not have an NI record before April 6, 2016.
People who contributed between the ages of 10 and 35 are entitled to part of the new state pension.
When you work, you pay NI and benefit from a qualifying year if:
- you are employed and earn more than £183 per week with one employer
- you are self-employed and pay NI contributions
You may not pay NI dues because you earn less than £183 a week. You can still get a qualifying year if you earn between £120 and £183 a week with an employer.
You can get NI credits if you cannot work – for example, due to illness or disability, or if you are a carer or are unemployed.
You can earn NI credits if you:
- apply for family allowances for a child under 12 (or under 16 before 2010)
- get Jobseeker’s Allowance or Employment and Support Allowance
- receive care allowance
If you don’t work or earn NI credits
You may be able to pay voluntary NI contributions if you are not in one of these groups but want to increase the amount of your state pension. You can find out more on the GOV.UK website.
What if there are gaps in your NI record?
You may have gaps in your NI record and still get the new full state pension.
You can get a state pension statement which will tell you how much state pension you can get. You can then request an NI declaration from HM Revenue and Customs (HMRC) to check if your file has any gaps.
If you have gaps in your NI record that would prevent you from getting the new full state pension, you may be able to:
- pay voluntary contributions to IV
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