The idea of working until I’m nearly 70 fills me with dread! I hope I don’t have to, but whether I do or don’t I still want to make sure I’m entitled to the highest level State Pension possible.
But what exactly would that be? Other key questions that then follow on: how many years do I have to work to qualify for the full state pension? When will I be able to get my hands on it? And seeing as it’s decades away, why the hell should I even care?
There’s confusing and misleading information out there (from pretty major websites too) so I’ll hopefully answer all of these questions and more in this article. It’s worth reading, I promise!
Why you should care about your State Pension now
Right, so it could well be a long time until you reach State Pension age. Hey, for me it’s at least another 30 years! But there are two reasons I care – and you should too.
First, you don’t automatically qualify. You need to make at least 10 years of National Insurance contributions, and potentially as many as 35 years to get the full amount. And it’s well worth making sure you have made or will make enough contributions to get that figure. The full amount might not seem much – just £159 a week. But that’s £8,200 odd a year. Until. You. Die. Live for another 25 years and it’s more than £206,000.
If you only qualify for two-thirds of the full amount (roughly what you’d get if you only made 24 years of full contributions) then you’d be £69,000 worse off over that time, or around £2,700 a year. That will make a difference.
Second – do you want to keep working until you actually reach State Pension age? If you don’t have any savings or workplace pensions then you no doubt will have to. But if you can afford to retire earlier it makes sense to ensure you don’t have to keep making (voluntary) contributions to get the max available to you.
It’s incredibly unlikely I’d be able to afford to retire at 50 – but the fact that I only need to make 11 more years of contributions before I qualify for the full State Pension means in theory I could.
But say you’re aiming for a more realistic 60 years old and need to make the top level of 35 years of contributions. Well, it doesn’t give you much room for missed years.
There is one caveat I’ll add to all this. A future government could change it all again. Hey, in 30 years there might not even be a State Pension anymore! But whilst there is, it’s worth keeping track and planning to get as much as you can.
What age can you get the State Pension?
Ok, let’s go back to basics. The State Pension is a guaranteed weekly income paid to you when you reach State Pension age. You can of course retire earlier if you have other income sources or other pensions, but you don’t get this cash until you hit the State Pension age.
The traditional age of 65 for men and 60 for women is sadly on its way out. It’s due to rise to 66 for men between 2018 and 2020, while for women it’s been moving up to be level with men since 2010. The exact age can even vary on the month you were born, as well as the year. But by April 2020 it’ll be 66 years old whether you’re a man or a woman.
The age then continues to increase, first to 67 and then to 68. In fact just a few weeks ago the government announced it plans to start the increase to 68 years old eight years earlier than expected, meaning those born between 6th April 1970 and 5th April 1978 will have to wait a year more than expected to get the cash.
There’s one way to find out what the date will be for you is to use the State Pension age tool on the Gov.UK website. You simply enter your date of birth and whether you’re male or female (gender only makes a difference to people already in their mid-60s) and ta-da, you’ll see your State Pension age.
You simply enter your date of birth and whether you’re male or female (gender only makes a difference to people already in their mid-60s) and ta-da, you’ll see your State Pension age.
Though of course it could – and probably will – change again. I imagine when it’ll be 69 or even 70 when my time comes.
Quick note – as the earlier increase to 68 is just a proposal it’s not been factored into the calculator, so add a year if you fit that eight-year range (1970 to 1978) mentioned above.
Who can get the State Pension?
Ok, this can get a little confusing. As I said earlier, you need to have made enough years of National Insurance contributions to qualify, and the longer you pay these, the higher the weekly amount you’ll get – up to a cap. That cap is currently £159.55*, though it’ll rise with inflation.
You generally make National Insurance contributions through your pay, or you might get National Insurance credits through things like child benefit, jobseekers allowance, carers allowance and maternity leave.
Under the new system (introduced in April 2016), you qualify for the State Pension after 10 years of contributions and will get the full rate after 35 years of contributions.
But it’s not going to be 35 years for everyone – it could actually be less. This is despite pretty much every major newspaper and personal finance website stating it’s now 35 years for everyone. It’s not! And I’m proof of this.
You see, if you started making contributions before April 2016 – which is going to be most of you reading this – the total number of years is based on a mix of the new and old systems.
For me I only need to make a total of 30 years of full National Insurance contributions. For my wife it’s 32 years. This is despite the fact we’ve both already contributed the same number of years so a far (19 years).
I called up the HMRC helpline to find out why this was (and why so many sources reported a blanket 35 years). The answer wasn’t massively clear, but it might be down to me being a little older than her, or me earning more in some of those years. Whatever the reason, we’re both examples of people who need to pay less than 35 years – so it could well be the same for you.
How to check your State Pension record
If you listened to last week’s podcast, you’ll know there’s a way to check how much State Pension you’ll get when you retire. It’s a five-minute job well worth doing so you know if you’re on track, or whether you need to take action now – and if you’re over 40 you may well need to fill in any missing gaps.
So how do you find out? Well you need to request a State Pension forecast. It’s easy and doesn’t take long. You need a Government Gateway ID, and it might take five to 10 minutes to set this up. You need to validate your identity using your passport or a recent payslip, but once sorted you can find out how many years you still need to contribute to get the full amount. For me it was 11 years.
You’ll also find out
- A forecast of how much you’d get at State Pension age
- An estimate of what you’d get at State Pension age if you didn’t make any more contributions
>> Check your National Insurance record and how many more years you need to pay to get the full State Pension
Then, in the same system (but annoyingly not on the same page) you can check your National Insurance record. You’ll see how many years you’ve already made full contributions (as mentioned this was 19 years for me so far). Add together those figures and you’ll get the total number of years that YOU need to pay.
This page will also tell you how many more years you have left to make contributions – i.e. before you reach the State Pension age.
So I now know that I’ve 19 full qualifying years and I’ve 30 years to contribute another 11 full years. Or in other words, I could stop working in 11 years and still get the full State Pension.
I can dream right?
* How much you get can get even more complicated too. I won’t go into detail here but you’ll get less if you ever “contracted out”. Or if you would have been better off under the old system it’s possible you might get small top-ups when you retire.