The State Pension can form a large part of an individual’s retirement income. For 2019/20, a full new State Pension will pay £168.60 per week (£8,767 pa) and under current rules, this will increase each April by the higher of average earnings growth, the rate of inflation (measured by CPI) or 2.5%.
Many individuals approaching retirement and State Pension age are unaware exactly how much State Pension they have accrued in their working lifetime and have often overestimated the amount they expect to receive.
It is often the case, that although individuals have paid National Insurance contributions throughout their working life, they may have either:
a) Paid a lower rate than people who paid into the Additional State Pension (known as State Second Pension or SERPS)
b) Paid these contributions into another pension
If either of these apply, an individual was ‘contracted out’. This is often forgotten about and its effects underestimated. Confirming your exact State Pension is easy to do and can be done online by clicking here.
This is an important step, as confirming your exact State Pension provides a solid base on which to plan your retirement income. You will also be able to see the exact date you will reach State Pension age, which is another unknown that is often just assumed. This is particularly important for women, who’s State Pension age may have changed over the last decade.
Checking your State Pension early on allows plenty of time for future planning. Action can be taken, if needed and appropriate given the circumstances. Here at Eldon, this is something we undertake as part of our service and we would look at the best and cheapest way for each individual to maximise their State Pension and overall retirement income as a whole.