For most people the State Pension provides the main underpin of income in retirement. In the current tax year a full new State Pension will pay £168.60 per week – £8,767 a year – and under current rules this will increase each April by the higher of inflation, average earnings, or 2.5%.
Given the important role that your State Pension will play in your retirement it’s really useful to know how much you have built up to date, when you are due to receive it (your State Pension Age), and how much you are on track to receive when you get there.
For a lot of people it’s a little bit more complicated than knowing you’ve always paid National Insurance throughout your working life. For example you may have paid a lower rate of National Insurance in previous years as a result of ‘contracting out’ of the additional State Pension (State Second Pension or its predecessor SERPS). You may also have received credit for years when you looked after children at home, formerly known as ‘Home Responsibilities Protection’ or if you were getting Carer’s Allowance for looking after someone else.
You can see then that it’s quite easy to over or underestimate how much State Pension you’ll get in retirement. Fortunately it’s relatively straightforward to check this – either online at www.gov.uk/check-state-pension or by filling in an application for a State Pension Statement – known as a BR19 form.
Once you are armed with this information you can see if any action needs to be taken, such as filling in any gaps in your record. We would always suggest checking sooner rather than later to give you the maximum amount of time to make any changes.
As always it’s best to seek advice before taking any action to ensure that you’re doing the right thing and that there are no unintended consequences. This is built into our service for our clients to ensure they are providing for retirement in the most efficient way possible.
Jon Bean is a Newton Aycliffe based Chartered Financial Planner for Carter Thompson Wealth Management, Tel: 01325 245288.
