Home Money What do YOU ​​know about state pensions? Myths debunked and SIX key questions answered

What do YOU ​​know about state pensions? Myths debunked and SIX key questions answered

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What do YOU ​​know about the state pension? SIX key questions are answered below

New research reveals that poor understanding of the state pension means many people approaching retirement do not know how much it is or when they will receive it.

One in six over-55s don’t know the current exchange rate, while just over a third have a rough idea and less than a third know the headline figure: £221.20 a week or around £11,500. sterling per year.

Meanwhile, one in five do not know their state pension age, which is currently 66 for both men and women and will rise to 67 between 2026 and 2028, according to the Standard Life study.

What do YOU ​​know about the state pension? SIX key questions are answered below

According to the company, knowledge gaps in areas such as eligibility, qualifying years and how the state pension differs from workplace savings have led to a number of misconceptions.

“The most notable was that each person’s National Insurance contributions are held in a personal fund that can be accessed when they reach state pension age,” he says.

“This was a strongly held belief that affected participants’ views on the fairness of the system.”

> SIX things you should know about the state pension: Find out below

In reality, current taxpayers fund the state pension through a pay-as-you-go system, but this information sparked a “strong emotional response” from participants who felt the system was unfair.

The firm says people largely agreed that if someone makes 35 years of contributions, they should be entitled to receive this money and not lose it if they die before getting it back, and the Government should not use their contributions for anything else.

Meanwhile, Standard Life found that one in seven people receiving the state pension receive less than the full amount, a topic This is Money pensions columnist Steve Webb is often asked about.

It will probably be because they didn’t have enough qualifying years on their National Insurance history, or because they “contracted out” for the second state pension or SERPS, which under the pre-2016 system meant you built up a larger work or private pension. instead.

One in ten pensioners said they did not know that National Insurance contributions determine the state pension they are paid when they retire – find your NI registration here.

The same proportion said it was not easy to know how much state pension they expected to receive – see their state pension provision here.

Younger people are even less likely than those over 55 to know about the state pension, and across all age groups 47 per cent do not know at what age they will receive payments.

Around 35 percent have no idea what the current state pension is, 45 percent have a rough idea and 20 percent know exactly.

Standard Life carried out two surveys, one with 6,350 and one with 2,000 people, both weighted to be representative of the UK adult population.

“State pensions remain a hot topic, with pensioners recently enjoying an 8.5 per cent increase in their payments under the triple lock.” says Dean Butler, managing director of retail at Standard Life.

‘While it is a welcome boost for millions, concerns have been raised about its sustainability for future generations.

‘With this level of debate and some complex rules and terminology, it is understandable that a significant proportion of UK adults lack knowledge about specific details of state pensions, such as the value of their entitlements and when they will qualify for the payment.

“However, the state pension is an important part of most people’s retirement income and it is clear that greater importance and more accessible information is needed so that people feel secure and can plan their financial future.” .

Butler added that there is a significant gap between what you receive from the state pension and what you may actually need or want in retirement, and it won’t help you support yourself if your goal is to retire before age 60.

“So it should just be part of your overall retirement plan, so it’s important to fully understand how much you might need to save in your personal or work retirement plan to potentially afford the retirement you want.”

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What do YOU ​​know about state pensions Myths debunked and

He cited industry research by the Life Savings and Pensions Association, which looks at what individuals and couples need for a minimum, moderate or comfortable retirement. and shows that costs have increased significantly across the board over the past year.

A couple now needs £59,000 a year to feel comfortable in old age, and a single person needs to save even more and achieve an income of £43,100 to cover meals out, holidays, trips to the theater and a car, plus necessities daily.

The PLSA figures assume you are entitled to a full state pension, but the annual earnings figures do not cover income tax, housing costs (if you rent or are still paying a mortgage) or care costs.

SIX things you should know about the state pension

1. How much will you get?

The full state pension is £221.20 a week or around £11,500 a year.

The basic rate is £169.50 per week, or around £8,800 per year. But people on the basic rate also receive significant top-ups, called S2P or Serps, as long as they have obtained them earlier in life.

Seniors received an 8.5 percent increase in the state pension from April 8, 2024.

Dean Butler of Standard Life says: ‘The state pension is an amount the government pays you every four weeks once you reach state pension age.

‘Not everyone can receive the full state pension and it may not be enough to live on alone, so it is important to know what yours might be, when you will be able to claim it and how it will compare to your other retirement savings.

‘It’s worth bearing in mind that the amount you will receive depends on your National Insurance record and how many qualifying years you have.

‘You will usually need at least 10 years of qualification on your National Insurance record to receive any state pension. You will need 35 qualifying years to receive the new full state pension if you do not have a National Insurance record before 6 April 2016.’

You can check your National Insurance registration here and you state pension provision here.

2. When can you start collecting your state pension?

Currently, the state pension age for men and women is 66 years and between 2026 and 2028 it will increase again to 67 years.

In 2028, the minimum retirement age will also increase, from 55 to 57 years, to access labor savings and other private retirement savings.

The Government has a state pension calculator here, and This is Money has a guide to state pension age here.

Butler says: ‘If you don’t want to collect your state pension immediately, you can also choose to defer it. This means you could receive larger payments when you start claiming it, which could be suitable for you depending on your circumstances.’

3. Can you improve your state pension?

Buying state pension top-ups can give a big boost to retirement income, but people are often baffled as to whether this will be worth it for them personally.

You’ll need to check your state pension record to find out how much you’ve already paid into one, then decide if you need to top up and, if so, in which years to fill in the gaps or buy from scratch.

The Government has launched a new online top-up service to help people do this more easily.

The website allows people to check which years are best to top up and buy on the spot, but they will still be able to call and pay offline if they prefer.

Use the Online state pension top-up service here either go to the HMRC app.

This is Money has a guide to topping up your state pension here, including what to check before handing over money.

Butler says: ‘If you have reached state pension age and are on a low income, it is worth checking whether you are entitled to a pension credit.

“This tax year, the pension credit normally increases your weekly earnings to £218.15 if you’re single or your joint weekly earnings to £332.95 if you’re in a relationship.”

4. What is the triple lock?

The triple lock means the state pension should rise each year by the highest level of inflation, average earnings growth or 2.5 per cent.

Both the Conservatives and Labor plan to commit to maintaining popular engagement in their election manifestos.

Seniors received an 8.5 percent increase in the state pension from April 8, 2024; the wage growth figure decided the increase, after the September CPI inflation figure was 6.7 percent.

5. How can you claim the state pension?

A few months before the state pension age you should receive a letter with an invitation code.

However, not everyone gets this, so you can find out Request the code and make a state pension claim here.

To claim you will need:

– The date of your most recent marriage, civil union or divorce

– Dates of any time spent living or working abroad.

– Your bank or building society details

– The invitation code

You must apply proactively to receive your state pension; Payments will not begin automatically. If you don’t apply in time, the Government will assume you have deferred your state pension.

6. How and when are payments made?

You will not start receiving your state pension on the first day or week you are eligible to receive it because it is paid four weeks late, so you will have to wait before making inquiries with the Department for Work and Pensions.

Butler says: ‘After you have submitted a claim, you will receive a letter about your payments, which will usually be paid into an account of your choice every four weeks, and you will be paid in arrears.

“Payday depends on your national insurance number, although you may be paid earlier if your normal payday falls on a public holiday.”

Source: Government and Standard Life.

Source: Government and Standard Life.

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