For many of us, the state pension still forms the bedrock of retirement.
This guaranteed, inflation-proof benefit is often the only index-linked income stream we have after finishing work and it is incredibly valuable. It keeps pace with rising living costs and is hugely expensive to replicate in the world of personal pensions – you may be aware of the well-publicised triple lock pension guarantee.
Like all government benefits, the state pension has undergone many changes. Notably, the State Earnings Related Pension (SERPS) morphed into the State Second Pension and was finally scrapped in April 2016, when the new ‘flat rate’ pension was introduced.
Whilst the simplification was a positive and most welcome step, a true flat rate will not be achieved for many years to come. This is often due to workers being ‘contracted out’ for periods of their employment, either through membership of defined benefit/final salary schemes or personal pension plans that were set up to receive the national insurance rebate. If either of these scenarios relates to you, there should be an associated ‘adjustment’ to the state pension accrual.
Knowledge is power
It is absolutely essential that you understand your state pension entitlement in advance of retirement. You need to make sure it is correct and look at what options you have to enhance or amend it.
Sadly, the government’s failure to communicate recent changes and workers’ lack of engagement has led to sever disappointment and anger among what have become known as the WASPI women – those caught out by the rising age of entitlement.
Checking your state pension benefits is relatively straightforward. You can create a Government Gateway account and obtain a forecast of your predicted pension and retirement date, should you continue to pay national insurance, along with a schedule of your contribution history. All you need is a valid passport and your national insurance number to register online and the whole process takes less than 10 minutes. Alternatively, you can access the information by completing form BR 19.
Unfortunately, that is not the end of the story. In recent weeks, it has come to light that more than 300,000 people have received incorrect forecasts from the online system. It is, therefore, extremely important to seek expert guidance, especially if you know you were contracted out or suspect your forecast doesn’t reflect this.
Here to help
My partners and I are happy to help interpret your state pension forecast, as we obtain this information as standard for all clients.
Over the years, we have successfully identified gaps in national insurance histories and taken steps to fill them by recommending payment of voluntary class III contributions. Some clients are now in receipt of income that is £12 a week higher, for life, than they would have received had we not intervened.
There are also specific opportunities relating to people who receive a defined benefit pension income. If you are retired from your original occupation, but are not yet of state pension age (for example, police officers, teachers and some NHS workers), you may have been contracted out for your entire working life. As a consequence, you might find you have a significant shortfall in your state pension forecast, compared to the maximum flat rate. If so, you can purchase additional voluntary class III national insurance credits at a very reasonable cost, compared to the increase in pension income.
Act now and request your pension forecast before it’s too late. If you’d prefer, we can do it for you, simply contact me on (01246) 298181 or email: firstname.lastname@example.org