Details matter / The State Pension01 June 2023
Before we share some thoughts and observations, we wanted to make a clear point that the State Pension invariably offers good value. The opportunity to maximise a guaranteed income for life, usually increasing with inflation, should not be missed. The deadline for people to make voluntary National Insurance contributions to top up any gaps between 2006 and 2016 was originally extended to 31 July 2023, and has now been extended to 05 April 2025, following many reports of difficulties getting through to the DWP and HMRC helplines.
Those qualifying for a full new State Pension will receive £203.85 per week from April 2023 (£10,600 pa gross), up from £185.15 per week. The State Pension is paid gross but is taxable.
State Pension accrual
At most client meetings, we ask clients and enquirers to check their State Pension accrual to date. One key point is that often it takes some time for the accrual from a previous tax year to update on the DWP system. Therefore, and as an example, if your State Pension forecast is showing a shortfall of two years (from the maximum of thirty-five years accrual) you need to look at the tax year to which the forecast is calculated.
We saw this very example recently, when a client checked their State Pension forecast and noted that they were two years short of the maximum entitlement. At the point of checking, the forecast was only calculated up to the end of the tax year 2020/2021 (April 2021). The client checked again some weeks later, and the 2021/2022 accrual had been added. Noting that they had sufficient earnings to accrue National Insurance contributions for the 2022/2023 tax year, the two years were completed with no need for a top-up.
Check your State Pension forecast
You can check your own forecast (via your Government Gateway) here: https://www.gov.uk/check-state-pension
As a note, the age you can receive a Bus Pass, if you apply for one, has been aligned with the State Pension age. You can check this age here: https://www.gov.uk/state-pension-age/y/bus_pass
Topping up your State Pension
We confirmed in our April blog the opportunity to top up state pension benefits, as follows:
The deadline for people to fill gaps in their NIC record has been extended to ensure that they can maximise their State Pension entitlement. The original deadline was 05 April 2023 to make voluntary contributions for gaps between 2006 and 2016 – however, this has been extended to 31 July 2023 [and subsequently to 05 April 2025].
The surge in calls to HMRC to meet the original deadline left phone lines blocked and people unable to get through.
Before you top up, it's important to check that this will add value – do talk to an appropriate adviser to make sure additional contributions will a) boost your pension and b) offer value in your circumstances.
Individual circumstances that may affect your decision might be health and expected longevity, as examples. Recent actuarial tables might suggest that for an individual based in the south-east, in good health and a non-smoker, with pension funds, might live to their mid-80's.
Check the detail now
It might be fairly noted that we are focusing in recent blogs on all things State Pension related. We make no apology for this.
With the unique 'legislative' window open to potentially make a real difference to your State Pension benefits (the backbone of many households' retirement planning with spouse/partners together in a household bringing in 2 x £10,600 pa gross / £21,200 pa gross for the full benefit), now is the time to take action.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899