Home Retirement Why you aren’t getting a full state pension and what you can do

Why you aren’t getting a full state pension and what you can do

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The full new state pension of about £10,600 a year can go a long way in paying for day-to-day bills when you retire. (Image Source via Getty Images)

The state pension forms the very backbone of our retirement income. Currently standing at around £10,600 per year, a full new state pension can go a long way towards helping us meet our day-to-day expenses but not everyone gets the full amount.

Our state pension entitlement is based on our national insurance record. As it currently stands you need 10 years’ worth to qualify for a state pension and 35 years’ worth to get the full amount. Many people don’t get a full state pension because they have gaps in their national insurance record because they spent time out of the workforce caring for children, for instance, or living abroad.

Read more: Are you missing out on thousands of pounds in lost pension income?

You can find out what you are on course to receive by getting a state pension forecast. This will also show you if there are any gaps in your record that you may wish to fill.

How can I boost my state pension?

If your state pension forecast shows you have gaps the first thing to do is check to see if you qualified for a benefit during that time that comes with a national insurance credit. Child benefit or universal credit are key examples. If you were eligible you may be able to backdate a claim and get the necessary credits.

As an example, many people opted out of receiving child benefit because they were hit by the high-income child benefit tax charge. The charge affected families where one parent earned more than £50,000 per year and reduced the amount of child benefit you were eligible for by 1% for every £100 you earned over this amount.

Man putting a coin into a pink piggy bank concept for savings and financeMan putting a coin into a pink piggy bank concept for savings and finance

Buying voluntary national insurance contributions can help plug gaps in your retirement savings. (seksan Mongkhonkhamsao via Getty Images)

This meant that if you earned £60,000 or more you effectively had no entitlement to child benefit and had to repay it through self-assessment. However, many people did not realise by opting out of child benefit they also would not receive the national insurance credit and so their state pension entitlement was affected.

Read more: Tackling the myths holding back your pension planning

You can now fill in a form that allows you to opt out of receiving child benefit but still get the national insurance credit, but many people continued to miss out and the government has recently announced plans to help more parents and carers backdate a claim.

Buy voluntary national insurance credits

You can also buy voluntary national insurance credits to fill any gaps. You can usually buy them for the past six tax years, but there is currently an opportunity for men born after 5 April 1951 or women born after 5 April 1953 to plug gaps going back to 2006. The ability to do this expires on 5 April 2025 so if you think you can benefit from this then be sure to get in contact in plenty of time.

However, you should check with the Department for Work and Pensions (DWP) Future Pension Centre first to make sure you really will benefit from the extra credits. If you were contracted out at any point in your working life, then you may find you get less state pension than you thought.

Read more: Five steps to boost your pension prospects in 2024

Contracting out was a feature of the old state pension system. You were allowed to opt out of the state second pension (also known as SERPS) in return for paying less national insurance. You paid less national insurance, which may affect your state pension entitlement, but in return you could receive extra from your workplace/personal pensions instead.

Contracting out has since been abolished but many people are still affected by it. If you are then it may be the case that even paying for extra national insurance contributions will not boost your state pension amount so it’s worth checking with DWP before handing over any money.

Watch: When should I start paying into a pension?

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