PENSION PAIN
Martin Lewis reveals two reasons why ‘vast majority’ on state pension will see payments rise by LESS than £473 next year
Plus we reveal how you can top up what you get
MARTIN Lewis has revealed two reasons why the "vast majority" on state pension won't get the full £473 boost next year.
The state pension increases every year in a bid to keep up with rising costs, but not everyone sees their payments go up by the same amount.
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Under the triple lock, payments rise in line with whatever is highest out of: wages for May to July, September's inflation figures, or 2.5%.
This week The Office for National Statistics published revised figures of 4.1% for July’s wages.
It also confirmed that September’s inflation rate fell to 1.7% - making wages the determining factor for the mechanism.
The full new state pension will increase from £221.20 a week - £11,502 per year - to £230.30 a week, or £11,975 per year.
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However, speaking on this week's The Martin Lewis Podcast, the consumer expert revealed there are reasons millions will not get the full headline figure.
Martin said: "The figure you will see in most places quoted that state pensioners will see a rise of £475 a year, in practical terms that is an unrealistic figure for the vast majority of pensioners who will not see that rise."
He then went on to explain that this is due to the figure relating to the full new state pension.
This pension came in in April 2016 and is a "totally new" type of pension for anyone who hits state pension age in or after that time.
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Martin continued: "But if you look at the numbers, only one in four state pensioners get the new state pension, the rest are on the old state pension because they hit state pension age beforehand.
"The old state pension is less in its basic form than the new state pension, therefore a 4.1% rise in the old state pension is not as much so the vast majority of state pensioners won't see £475 a year, they will see £363 a year as the full old state pension rise - it's much smaller than is often quoted."
Could you be eligible for Pension Credit?
The Money Saving Expert then went on to explain that even those on the new style state pension can only get the full amount if they have the correct amount of qualifying years.
Under current rules, you need 35 “qualifying years” to get the full new state pension.
He said: "If you don't have your 'full' qualifying years which millions don't, especially many of the poorest - many of those who are eligible for pension credit - then you won't get the full rise because it is a 4.1% rise on what you got and the £363 a year for the old state pension is if you're on the 'full' old state pension."
It's important to bear this all in mind, Martin explained, as pensioners need to have "realistic expectations" of what they can get.
He continued: "But also in the debate over winter fuel payment is what's often quoted is the triple lock increase of £475.
"But only one in four state pensioners get the new state pension which is the higher amount and many of those won't be on the 'full' state pension - so we need to be slightly careful.
"Many people have come to me and said yeah but they get this triple lock of this much extra a year - but the vast majority of pensioners won't get the full £475, which is what you will see quoted in many media outlets and many government communications.
"The vast majority of pensioners will see an uplift that is far less than that because the vast majority of state pensioners are on the old state pension and many don't have the full state pension."
We explained earlier this month why it is that not everyone gets the full amount here.
Topping up your state pension
If you think you're missing National Insurance years, the first thing to do is check your state pension forecast.
You can check this as well as the State Pension age through the government's new 'Check your State Pension' tool online at www.gov.uk/check-state-pension.
The tool is also available through the HMRC app, which you can download free on the Apple App Store and Google Play Store.
You might be able to buy back years.
But earning back the years isn't free, so your voluntary contributions come at a price.
If you fill gaps between 2006/07 and 2015/16, you'll pay the 2022/23 rates for contributions.
It is worth £15.85 a week, which means it costs £824.20 to buy one year of contributions.
As the state pension was £185.15 per week in 2022/23, this boost would add £5.29 per week or around £275 per year.
Although you'd have to pay £8,242 (10 lots of £824.20), the annual state pension boost would be around £2,750.
Someone who was retired for 20 years would get back around £55,000 in total (before tax).
Anyone under 73 can make voluntary pension contributions, as it's assumed everyone under this age will claim the new state pension.
If you're below the state pension age, you can check your state pension forecast by visiting www.gov.uk/check-state-pension to determine if you'll benefit from paying voluntary contributions.
You can also contact the Future Pension Centre by calling 0800 731 0175.
If you’ve reached state pension age, contact the Pension Service to find out if you'll benefit from voluntary contributions.
You can contact this service in several different ways by visiting www.gov.uk/contact-pension-service.
You can usually pay voluntary contributions for the past six years.
The deadline is April 5 each year.
For example, you have until April 5, 2030, to compensate for gaps in the tax year 2023 to 2024.
The deadline has been extended for making voluntary contributions for the tax years 2016 to 2017 or 2017 to 2018. You now have until April 5, 2025, to pay.
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Find out how to pay for your contributions by visiting www.gov.uk/pay-voluntary-class-3-national-insurance.
You could also be eligible for the top-up benefit Pension Credit if you’re 66 or older and your income is below £218.15 a week if you’re single or £332.95 as a couple or if you meet other criteria.
Pension Credit explained
Pension Credit is a benefit which gives you extra money to help with your living costs if you’re on a low income in retirement.
It can also help with housing costs such as ground rent or service charges.
You may be able to get extra help of you're a carer, have a disability, or are responsible for a child.
It also opens up access to lots of other benefits such as the warm home discount scheme, support for mortgage interest, council tax discounts, free TV licences once you’re over 75, and help with NHS costs.
To qualify, you need to be over state pension age and live in England, Scotland or Wales.
If you have a partner, you need to include them on your claim.
Pension Credit tops up:
- your weekly income to £218.15 if you’re single
- your joint weekly income to £332.95 if you have a partner
However, even if your income is higher, you might still qualify if you have a disability or caring responsibilities.
There is also another element to Pension Credit called savings credit. To get this, you need to have saved some money towards your retirement.
You can get an extra £17.01 a week for a single person or £19.04 a week for a married couple.
If you have more than £10,000 in savings, the government uses a calculation to work out how much it adds to your income.
Every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week.
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