How to get to know your state pension - Martyn James

Of all the important things we spend our money on, pensions are the most misunderstood.

There are lots of reasons. The most obvious is the simple fact none of us want to admit we won’t last forever. If you’re under 50, then retirement seems a long way off – and if you’re under 30 it’s almost inconceivable. Pensions can often seem overly complicated too. Readers often tell me they don’t understand how their pension works or what they can expect at retirement. I admit, pensions and tax are my weakest subjects when it comes to consumer rights. So I’ve drafted in my friend and fellow TV expert, Sarah Pennells, to help me tackle today’s subject: How to get to know your State Pension.

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Line up a happy future by finding out what your State Pension will be - it's better to know now, as this gives you the chance to top it up (Picture: Adobe)

What will I get?

According to exclusive research for this column from Royal London, just under half of all adults have never checked to see how much cash they are likely to get when they claim their State Pension. Over two-thirds don’t know if they have any gaps in National Insurance (NI) payments. And a whopping 94 per cent haven’t claimed any NI credits they may be entitled to. This matters because over one in five people aged 66 or over said the State Pension is their only source of income in retirement.

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What is the State Pension?

It’s a regular payment that comes from the government that you claim when you reach state pension age. The amount you get depends on your NI contributions. Most of us pay NI on any income we receive while working. If you’re not sure if you’re paying NI then you can find out more by typing “check your National Insurance record” into a search drive and clicking on the official Gov.uk site.

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What is the State Pension Forecast?

The State Pension forecast tells you how much State Pension you’ve paid in to so far. It also tells you what you’re potentially going to get when you reach State Pension age... and when that might be. There are different ways you can check your State Pension forecast, but the quickest way to do this is to go onto the Gov.uk website or download the HM Revenue and Customs app.

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How much NI do I need to pay to get the full state pension?

You need to have paid or been credited with 35 years of NI to be able to get the full State Pension. But if you’ve got gaps as a result of work or changing circumstances, don’t worry. You can pay additional contributions. But get some advice first as there might be better ways to save for retirement.

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What are NI credits?

Before forking out to fill your NI gaps, check to see if you are eligible for NI Credits first. You can get credits if you are looking for work, ill, disabled or on sick pay, on maternity or paternity leave, if you’re a parent or a carer. Search “national insurance credits” on the Gov.uk website.

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What about work and private pensions?

The world of work has changed dramatically. There are few jobs for life and over a third of younger people will already have had four or more employers. If you had a workplace pension, with lots of businesses, it’s easy to forget them. Yet according to Sarah, there’s more than £31 billion in lost pensions out there. It’s free to track down this cash, too. Check out the guide on the free Money Helper website.

Don’t forget that you can effectively get free money paid into your workplace pension, too. Many businesses will match the money you pay into your work pension, so ask your HR team how this works.

You can check out Sarah’s in-depth guide to the state pension and your rights here: www.royallondon.com/guides-tools/pension-guides/pension-basics/how-to-check-your-state-pension-forecast/

Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist. Read more from him at this link.