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Avoid state pension reliance by boosting retirement plans now

by wrich
gawdo
  • The full basic rate state pension in 2021 delivers 22.5% of median average earnings. The full new state pension delivers 29.4% of median average earnings.
  • Both benefits are due to be increased by 3.1% in April 2022.
  • State pension plays an important part in people’s retirement planning but it is the foundation and needs to be supplemented by other sources of income such as workplace and personal pensions.
  • The HL Savings and Resilience Barometer recently showed less than 40% of people were on track to enjoy a moderate retirement income.

Today DWP published benefit rate statistics Abstract of DWP benefit rate statistics 2021 – GOV.UK (www.gov.uk)

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“The state pension forms the backbone of many people’s retirement planning but should not be relied upon in isolation. Even a full new state pension – currently £179.60 per week – will cover less than 30% of average weekly earnings and while you would expect your outgoings to decrease in retirement you face living on a pittance if you are solely reliant on it.

If you want a decent lifestyle in retirement you must build on the state pension with other income sources such as workplace or personal pensions. However, recent data from the HL Savings and Resilience barometer shows less than 40% of people are on track to achieve a moderate income in retirement – more needs to be done.

You can boost your pension by making relatively small tweaks. For instance, increasing your contribution whenever you get a pay rise or start a new job. You may also find that if you contribute more then your employer will also boost their contribution to your pension, so it is worth checking to see if they are willing to do that. Over time these changes can really add up and make a huge difference to your retirement income.

Many people also do not get a full state pension. This could be because they were contracted out at some point in their careers or didn’t accrue enough national insurance credits – you currently need 35 years’ worth – to qualify for a full state pension. Make sure you are as prepared as you can be by checking your state pension forecast here Check your State Pension forecast – GOV.UK (www.gov.uk) and if you have a shortfall there are things you can do to plug the gaps.

Making sure you claim Child Benefit if you are entitled to it means you can claim national insurance credits for time spent out of the workplace, and if you are under state pension age and looking after grandchildren so their parents can return to work you may qualify for national insurance credits under the specified adult childcare credit regime. You can also buy national insurance credits to plug gaps if needed.

If you are already retired and can’t claim a full state pension you should check to see if you qualify for Pension Credit. This will give you an uplift to your income as well as help with bills. It is a hugely important benefit that remains underclaimed.”

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