The Department for Work and Pensions (DWP) today unveiled the most recent benefit rate statistics, providing some startling insight as to the level of support the state pension provides. The full basic state pension, which is £137.60 per week, delivers just 22.5 percent of median average earnings.
The full basic state pension, which is £137.60 per week, delivers just 22.5 percent of median average earnings.
On the other hand, the full new state pension, which pays at a higher amount of £179.60, delivers 29.4 percent of median average earnings.
Both the basic and new state pension are due to be increased by 3.1 percent from April 2022, taking them to £141.85 and £185.15 respectively.
Finance experts at Hargreaves Lansdown (HL) believe that although the state pension plays an important part in people’s retirement planning, it is only the foundation and needs to be supplemented by other sources of income such as workplace and personal pensions.
“While you would expect your outgoings to decrease in retirement you face living on a pittance if you are solely reliant on it.”
She also offered some insight as to how people can improve their retirement outlook by making simple changes to their saving habits.
Ms Morrissey explained: “If you want a decent lifestyle in retirement you must build on the state pension with other income sources such as workplace or personal pensions.
“You can boost your pension by making relatively small tweaks. For instance, increasing your contribution whenever you get a pay rise or start a new job.
“You may also find that if you contribute more then your employer will also boost their contribution to your pension, so it is worth checking to see if they are willing to do that.
“Over time these changes can really add up and make a huge difference to your retirement income.”
Another factor to consider is that many people do not get a full state pension, as their National Insurance record may now allow it. This could make managing money in retirement even more of a challenge.
Ms Morrissey explained that this could happen if someone was contracted out at some point in their careers or did not accrue enough National Insurance credits.
Britons currently need 35 years’ worth of National Insurance contributions to qualify for a full state pension.
Ms Morrissey urged Britons to make sure they are as prepared as they can be by checking their state pension forecast. There are ways people can plug gaps in their National Insurance record if necessary.
She continued: “Making sure you claim Child Benefit if you are entitled to it means you can claim National Insurance credits for time spent out of the workplace, and if you are under state pension age and looking after grandchildren so their parents can return to work you may qualify for credits under the Specified Adult Childcare credit regime.
“You can also buy National Insurance credits to plug gaps if needed.”
Ms Morrissey concluded: “If you are already retired and can’t claim a full state pension you should check to see if you qualify for Pension Credit. This will give you an uplift to your income as well as help with bills. It is a hugely important benefit that remains underclaimed.”