Are you entitled to a full state pension?
The full basic state pension will be increased by 10.1% in 2023, bringing it to £883 per month.
However, if you have gaps in your National Insurance contributions record or haven’t paid enough National Insurance contributions, you may not qualify for the full amount.
This could be because:
• You took some years out of work to raise children,
• You were “contracted out” of the state pension
Although most of us cannot live on £883 per month, this guaranteed income provides a valuable underpin to your basic retirement needs. With this, do not have to manage any investment risk at all.
This allows your other assets to fund the more “fun” elements of your lifestyle.
The state pension benefits from the “triple lock”, a policy that guarantees (under current rules) that the UK state pension will increase each year by whichever is the highest of three options: the rate of inflation, average earnings growth, or 2.5%.
The purpose of the triple lock is to ensure that the state pension keeps pace with the cost of living and earnings, and thus provides a consistent and adequate level of income for retirees.
How can you find out whether you are entitled to a full state pension?
Visit www.gov.uk/check-state-pension to see if you have built up enough years of national insurance contributions. Through this website you can also find out how to make additional National Insurance contributions, known as “voluntary contributions,” to boost your entitlement if necessary.
When should you do this?
You can “top up” your national insurance contributions before you reach state pension age, and if you do so before 5th April 2023 you will be able to fill in gaps as far back as 2006. After 5th April 2023, you will only be able to top up contributions from the last six years.
Is it worth it?
This of course depends on your personal circumstances, so do get in touch with your adviser if you are not sure. However, in some cases a one off top up of £825 could provide an additional pension income of £275 per year, which means you would break even if you survive just three years after commencing your state pension. In most circumstances, this is a worthwhile exercise.