By: Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:
“The state pension gap is still narrowing, with the amount women receive continuing to rise. The introduction of the new state pension in 2016 has significantly boosted the amount women receive and we are seeing a big drop in the number of women receiving less than £100 per week in state pension. As more women retire into the new state pension system we should see incomes continue to grow and the introduction of auto-enrolment will see many more women further build their retirement resilience with a workplace pension.
It is hugely important women focus on building their own retirement wealth. The new state pension does not allow you to inherit state pension entitlement from a spouse in the same way the old system did, and so women’s state pension is based on your individual national insurance record. Similarly, it can be tempting to rely on a spouse’s workplace pension provision if it is particularly generous, but in the case of separation or divorce many women may find themselves approaching retirement with little in the way of pension income.
The state pension forms the backbone of peoples’ retirement planning. Under the current system you need ten years’ worth of national insurance (NI) credits to qualify for a state pension and 35 years’ worth to qualify for the full amount. Women can often struggle to reach the full amount because they spend time out of the workforce looking after families. However, claiming state benefits during these times can mean you can still claim NI credits and build your entitlement.”
How you can boost your state pension
- Go online and check your state pension entitlement on Check your State Pension forecast – GOV.UK (www.gov.uk) This will also tell you your state pension age.
- Claim child benefit – Women in particular miss out on valuable state pension credits when they are at home looking after children. However, if they claim child benefit, they will receive national insurance credits that count towards their state pension. Many women have missed out on this in the past because their husband claimed the child benefit rather than them. Others missed out when they opted out of child benefit after the introduction of the high-income child benefit tax charge. If you claim child benefit in your name, then you will get the credit towards your pension.
- Specified Adult Childcare Credit – Are you under state pension age and looking after a family member under the age of 12 while their parent or main carer goes back to work? If this is the case, you could qualify for NI credits under Specified Adult Childcare Credit as the working parent essentially transfers their NI credit to you.
- Buy NI credits – If you can spare the cash you can plug gaps in your NI record by buying voluntary class 3 NI contributions. Buying a full extra year costs around £825 and you can typically buy up to six years’ worth, though in certain circumstances you can buy more.
- Claim Pension Credit – If you are over state pension age and on a low income then you should check whether you are eligible for Pension Credit. Pension Credit tops up your weekly income to £182.60 if you’re single and £278.70 in joint income if you have a partner. It also entitles you to other benefits such as help with council tax and a free TV licence.