Over one million Brits ‘only receiving fraction of full state pension’ – easy steps to take to boost your pot
ALMOST two million people are missing out on the full State Pension with thousands receiving just £20 a week or less.
The full flat rate of the State Pension is worth £221.20 a week, equal to £11,501 a year.
Yet only half the 3.5million receiving the benefit are getting the full amount, according to shock figures obtained by pension and investment company Royal London.
Around 150,000 are paid under £100 a week and more than 17,000 pensioners are receiving a State Pension of less than £20 a week.
You miss out on the full state pension when you have gaps in your National Insurance record.
You need 35 years of contributions to qualify for the full amount.
Those with fewer years get a proportionately smaller State Pension.
Many have private pensions to supplement retirement income.
However, one in five at State Pension age rely solely on the benefit for income.
Pensioners on low income could claim Pension Credit worth up to £3,900 a year.
Yet, an estimated 880,000 people over State Pension
age are missing out on this extra help.
Sarah Pennells, consumer finance specialist at Royal London said: “The good news is that, even if you have gaps in your National Insurance record going back over a decade or more, it may still be possible to top up your National Insurance contributions and
increase the amount of State Pension you’re entitled to.
“Under the new State Pension system, you don’t get any State Pension at all if you have fewer than ten years’ National Insurance, so it’s important to check your National Insurance contribution record.”
HOW TO BOOST YOUR STATE PENSION
If you don’t have the full 35-year record of NI, you may be able to buy contributions which usually pays off.
The cost of buying contributions costs £824.20 and applies to all years from 2006/07 to 2022/23. Or for the tax year 23/24 the cost is £907.40.
The cost is lower if you have already made some partial contributions in a particular year.
Buying one extra year of contributions generally pushes up your pension pay out by £328.64 a year in retirement.
This means you’d usually get your money back within three years of drawing your pension – or four years if you allow for basic rate income tax.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
Until April 2025, people can make backdated contributions for missing years as far back as 2006.
But after next year, contributions will only be able to be backdated for a maximum of six years.
So it’s worth acting sooner rather than later if you have gaps, especially dating back further than six years ago.
Sarah Pennells added: “You may be entitled to free National Insurance credits if you’re caring for a child under the age of 12 by registering for Child Benefit, or if you’re caring for
someone else who’s getting certain benefits.
“In that case, you may be able to top up your National Insurance record for free.
“But for those who can’t, it’s important not to miss this deadline of 5 April 2025.”
Hundreds of thousands on low incomes are also missing out on an average of £3,900 a year from Pension Credit.
The benefit tops up weekly income to £218.60 if you’re single or joint weekly income to £332.95 if you have a partner.
You may also get additional pension credit if you are disabled, have caring responsibilities or have to pay certain housing costs such as mortgage interest payments.
The benefit also unlocks other help such as council tax reductions and a free TV licence.
You can start your application up to four months before you reach state pension age.
Pension Credit explained
Pension Credit is a benefit which gives you extra money to help with your living costs if you’re on a low income in retirement.
It can also help with housing costs such as ground rent or service charges.
You may be able to get extra help of you’re a carer, have a disability, or are responsible for a child.
It also opens up access to lots of other benefits such as the warm home discount scheme, support for mortgage interest, council tax discounts, free TV licences once you’re over 75, and help with NHS costs.
To qualify, you need to be over state pension age and live in England, Scotland or Wales.
If you have a partner, you need to include them on your claim.
Pension Credit tops up:
- your weekly income to £218.15 if you’re single
- your joint weekly income to £332.95 if you have a partner
However, even if your income is higher, you might still qualify if you have a disability or caring responsibilities.
There is also another element to Pension Credit called savings credit. To get this, you need to have saved some money towards your retirement.
You can get an extra £17.01 a week for a single person or £19.04 a week for a married couple.
If you have more than £10,000 in savings, the government uses a calculation to work out how much it adds to your income.
Every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week.
It’s also worth checking for state pension underpayments particularly for women.
The Department for Work and Pensions estimates around £835million is owed to pensioners in total as a result of errors.
You can go to the DWP directly to find out whether you have been affected.
An online tool launched by former pensions minister Steve Webb on behalf of actuarial firm LCP online at lcpp.com can also help you check if you might be affected.