This is a bit of a different blog but I wanted to create this as there is a ticking clock which you need to be aware of which could potentially have an impact on your financial plan.
You see, when I’m building financial plans for clients, one important factor to include is our clients state pension entitlement. It’s likely going to be important for your financial plan too. It certainly is for mine.
Let’s be clear, The current full new state pension entitlement is just over £10k per year (£10,600 and 20p – Don’t spend the 20p all at once!) and this typically goes up every year. Now,bear in mind that the state pension is individual so if you’re a couple you’ll get double-bubble!
However,it is dependent on how many years of national insurance contributions you’ve made (or received as a credit!)
Typically you need a full thirty-five worth of national insurance credits to get a full state pension. Normally, you can build up national insurance credits by making national insurance contributions, basically paying tax through work, self employment or as a director of a limited company.
However if you’re not working but have applied for jobseekers allowance whilst doing so you should get Class 1 credits automatically. You should also get credits for periods of time you’ve received other state benefits including Maternity allowance, Child benefit or Carers allowance…To find the complete list of circumstances for earning credit, visit the government website.
One important point on this. If you’re been on Statutory Sick Pay or Statutory parental pay but haven’t earned enough in a particular year to earn the NI credit you might have to write to the HMRC to get them to top it up for you. I’ll put the link to the government site with all the details below. (https://www.gov.uk/national-insurance-credits)
The big thing you need to know if there’s a lot of people who might not have ‘earned’ the full 35 years to benefit from the full state pension.
Now, if you’re under 45 it’s probably worth checking your entitlement, but the good news is you’ve got a decent chunk of time to earn extra years (if you’re 45 now, like me, it’s likely that you’re state pension age is likely to between 67 & 68)
As a Brucey bonus you also get your free bus pass at the same time. Although you might be entitled to free travel in Scotland, Northern Ireland, and London from 60 depending on where you live!
If you’re over the age of 45, my recommendation is to check your state pension entitlement now. This is incredibly easy to do using the Government’s State Pension calculator. Literally it takes about 5 minutes to complete, although you do need to sign in using the government gateway process.
You’ll then get a state pension statement and it will tell you what you might be entitled to but also what historic years you might have.
Now, you’ve got a choice…
You can choose to fill the gaps (effectively you can pay a lump sum to fill these gaps) or you can decide not to. One reason might be that you might have enough time to accumulate the missing years (not only something you can do but probably the only ‘Mike and Mechanics’ song I know!)
The good news is there’s help to work out what you need to.
Firstly, if you’re working with a professional adviser they’ll be able to help you with this and certainly we’re working with clients who we support with their state pension. So, if you’re working with an adviser, make sure you speak to your adviser about this.
Secondly, you can get advice directly from either the Future Pension Centre (https://www.gov.uk/future-pension-centre) or the pension service (https://www.gov.uk/contact-pension-service) , both funded by the government to help you make the right choice.
Now one important thing about timescales is getting this organised. When I started thinking about writing this article, you could buy back years all the way back to 2006, up until the 31st July 2023.
After that you were only going to be able to be allowed to top up contributions for the last 6 years.
The good news is that now you’ve got a bit more time. I suspect that one of the reasons for this is that they’re has been massive demand for people checking their state pensions. Now, you’ve got until the 5th April 2025.
Here’s my recommendation.
Check your state pension today, straight after watching this video and whilst it’s front of mind.
Check your gaps and make a decision about whether you top it up sooner rather than later.
Checking your entitlement is an absolute ‘no brainer’ and the best thing you’re going to find out is that you don’t need to do anything. However if there is a gap you can work out to do it.
As always, I hope this has been useful and feel free to email me (Chris@Cervellofp.co.uk) or leave a message on this blog to let me know how you get on.