People are being warned of dozens of DWP errors that could reduce your final state pension pot. It comes amid new data that raises questions about whether even the full sum is enough to live on in retirement.
While millions of people are now making their own plans to fund their retirement, the state pension provides a vital safety net to fund essentials.
The state pension is currently worth £221.20 a week. It adds up to £11,502.40 a year, and is set to rise to just under £12,000 in April next year.
The Pensions and Lifetime Savings Association (PLSA) says single people need £14,400 a year for a “basic” retirement. If that is the case, the full state pension takes you 80 percent of the way there but no more.
For a couple, the PLSA says that a basic retirement will cost £22,400 a year. In that case, if both partners get the full state pension, they will have already achieved that minimum income figure.
However, for those who expect a “moderate” retirement, it says that singles need £31,300 a year. In addition, couples need £43,100. And on that basis, the new state pension only makes up 37 percent or, at best, 53 percent, of what a couple would need – leaving quite a large shortfall.
The PLSA estimates that those looking for a “comfortable” old age would need £41,300 a year as a single or £59,000 for a couple, which is way ahead of anything the State Pension can offer.
Despite this, the State Pension remains a vital element to the finances of the increasing number of ageing Brits. But to get the full state pension, you need 35 qualifying years on your National Insurance record and to get anything at all you need at least ten.
Simple mistakes can mean that you don’t get everything you are entitled to, which could leave you in financial trouble later.
Avoiding these could make a big difference. And key in a way you might not expect is making sure you don’t miss out on benefits you are entitled to.
For instance, if you are responsible for a child who is under 16 (or under 20 and in approved education), you can get child benefit, which is designed to help you with the costs of raising your family.
However, it is important to understand that claiming the benefit also gives you National Insurance Credits.
That means that a stay-at-home parent can still build up their state pension entitlement and could get up to 12 years’ worth of credits.
It also provides a boost for part-time working parents who do not earn enough to pay NICs.
One thing that often puts people off from claiming is the high-income child benefit charge, which essentially means if either partner earns over £50,000 you have to complete a tax return and start paying some of the child benefit payments back.
Over £60,000 and the higher earner has to pay the whole lot back.
However, you can make a claim to get the NI credits, and simply choose not to receive the payments, which avoids those problems.
Claimants automatically get National Insurance credits if they claim Child Benefit and have a child aged under 12.
If you do not need the National Insurance credits, you could transfer them to your husband, wife or partner.
Alternatively, you could apply for Specified Adult Childcare credits for a different family member who provides care for your child.
Not claiming other benefits
There are lots of other benefits that automatically give you NI credits, which is why it is important to claim anything you might be entitled to.
These include:
- Jobseeker’s Allowance
- Employment and Support Allowance
- Unemployability Supplement
- Maternity allowance
- Carer’s Allowance
- Income Support
- Carer Support Payment (Scotland only)
- Working Tax Credit
- Universal Credit
- Failing to claim NI credits on some benefits
There are some benefits or situations where you are entitled to NI credits if you need them, but these aren’t given automatically, and you need to apply. Failure to do this could mean expensive gaps on your record.
These include:
- If you’re on Jury Service and you’re not self-employed
- If you’re a foster carer, or a kinship carer in Scotland
- If you were wrongly imprisoned and your conviction was quashed by the Court of Appeal (or the Court of Criminal Appeal in Scotland)
- If you’re married to or a civil partner of a member of the armed forces, went with your partner on an overseas posting after 6 April 2010, and are returning to the UK
- If you’re over 18 and on a government-approved training course that lasts no longer than 1 year but you were not sent by Jobcentre Plus
- If you’re on Statutory Sick Pay and you do not earn enough to make a qualifying year.
- If you’re caring for one or more sick or disabled person for at least 20 hours a week
- In most cases where you need to claim, you need to write to PT Operations North East England, HM Revenue and Customs, BX9 1AN, United Kingdom. You should include your National Insurance number and say when the credits are for and why you’re eligible.
- If you’re unemployed and looking for work, but not on Jobseeker’s Allowance, you can contact your local Jobcentre to claim Class 1 credits
- If you’re married to or a civil partner of a member of the armed forces, went with your partner on an overseas posting after 6 April 1975, reach state pension age on or after 6 April 2016, and are not getting Class 1 credits
- If you’re on Working Tax Credit, you might get credits automatically, but you need to check your record to make sure you’ve received them.
- If you’re on Statutory Maternity, Paternity or Adoption Pay, or Additional Statutory Paternity Pay, and you do not earn enough to make a qualifying year.
Not filling gaps in your record
If you have applied for all the credits you’re entitled to and your record is still not full, you can make voluntary payments to fill the gaps. Information on how to do this can be found here – https://www.gov.uk/check-
You might have missing years if you were:
- living or working outside the UK
- unemployed and were not claiming benefits
- self-employed but did not pay contributions because of small profits
- employed but had low earnings
Importantly, you should only fill in missing years of NI contributions if you are unlikely to have enough years by the time you reach state pension age.
If you’re below State Pension age, you can check your State Pension forecast to find out if you’ll benefit from paying voluntary contributions and how much they will cost.
A gap of one year is typically worth 1/35 of the full pension rate.
At this year’s rates, that’s £6.32 per week, £328 per year, or a little over £6,500 across 20 years for every one year gap that you fill.
You should check for gaps now, because the rules on how many years you can fill change from April 6.
Currently, you can go back to 2006, but after then you will only be able to pay for the previous six years.
State pension errors
A series of government mistakes have meant that hundreds of thousands of people have been paid less state pension than they should have been. Women have been hardest hit, but anyone can be impacted.
The main categories include:
- Widows whose husbands died after March 17, 2008
- People who took time off work because of caring responsibilities between 1978 and 2010
- Women who reached state pension age before 2016
- Women who divorced their partners after state pension age
- Anyone aged over-60
- Heirs and widows of people in the categories above
- Anyone who is getting less than £93 a week in state pension
