Martin Lewis discusses pension credit 'top-up'
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For pensioners with a full record of National Insurance contributions, they will receive £179.60 a week if their state pension age was after April 2016 and £137.60 a week it their state pension age was before this point. But if someone doesn’t have the full 35 years of National Insurance contributions, they will receive a reduced payment, as is the case for more than two million people receiving a meagre £100 a week or less from their state pension.
Helen Morrissey, senior pension and retirement analyst at Hargreaves Lansdown, said: “We often talk about state pension in terms of the maximum amount of money you can receive but data shows there are still many who receive far less than this.”
She said that the most recent DWP figures show over 2.1 million pensioners receive under £100 a week and that women are the most likely to fall into this category.
“Luckily, there are ways people can boost the amount of state pension they’re likely to receive”, Ms Morrissey added.
It is common for people to miss out on making National Insurance contributions because they’re at home raising a family, but some may not realise that claiming Child Benefit will generate credits to go towards their pension as if they were making the National Insurance contributions.
Under the old, pre-2016, system people could contract themselves out of the Additional State Pension part of the state pension.
This meant they could divert what would have been paid as NICs and instead top-up their workplace pension.
Many women have missed out on this in the past because their husband has claimed the benefit rather than them.
Some have missed out by deciding not to take the benefit after the benefit got gradually lower when income passed £50,000 a year and was tapered down to nothing when income reached £60,000.
People can also make up lost NICs if they are under the SPA – currently 66 – and looking after a family member under 12-years-old. In this case, they will qualify for the Specified Adult Childcare Credit.
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It is even possible to simply buy NICs if the spare cash is available. Buying a full year’s worth of NICs will cost £800.
Another way to top up state pension income is through the Pension Credit, which tops up weekly income to £177.10 for single individuals and £270.30 in joint income for couples.
The Pension Credit can also help out with council tax and a TV licence for over-75s.
Despite the potential of Pension Credit to significantly boost retirement income, take up rates remain stubbornly low with just 60 percent of those entitled to it claiming it.
Ms Morrissey said: “If you have other sources of income retirement, this may not be an issue, but for many people the state pension is the backbone of their retirement planning.
“They could receive a nasty shock if they find they are entitled to less than they thought.”
The news that many receive state pensions under £100 a week comes amid mounting speculation over the viability of the triple lock.
The triple lock ties the value of the state pension to the highest of inflation, earnings growth or 2.5 percent.
Due to the artificial wage growth seen as a result of workers coming away from furlough support, wage growth has exceeded eight percent in the last ONS figures.
This means the state pension could rise by more than eight percent if it remains in place, but this is by no means certain.
Hargreaves Lansdown recommends that people check their state pension entitlement on GOV.UK‘s Check your State Pension forecast tool.
Here, they can also find out their state pension age.
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