09/01/19Do you know your State Pension age?
Retiring is a milestone many of us look forward to as it draws near. The prospect of leaving the world of work behind and having more free time to dedicate to the things you enjoy is certainly appealing. But research suggests that many of those approaching retirement don’t know when they can expect to receive their State Pension, putting their financial security and plans at risk.
The State Pension age has gradually been increasing for women over the last few years and it’s now increasing for all. Yet research commissioned by Age UK, suggests that many of those approaching retirement aren’t aware of the changes. The poll found:
- One in four people aged between 50 and 64 don’t know when they can claim their State Pension
- Almost a fifth found their State Pension age was higher than expected
- Three in ten people have never checked their State Pension age
Caroline Abrahams, Charity Director at Age UK, said: “Clearly, there is still much confusion about the age at which people can expect to receive their State Pension and our worry is that many who have few resources to fall back on are in for a nasty shock.”
While you can choose to retire before collecting your State Pension, it’s important to understand the level of income you can expect to receive and how it will change over time. As a result, knowing your State Pension age and how much you’re entitled to should be considered a priority.
The State Pension has changed a lot in recent years.
In 2010, the State Pension age was 65 for men and 60 for women. However, women’s State Pension age has gradually been increasing and in November 2018 equalised with men. Gradual increases mean that by October 2020, both men and women will need to be 66 before they’re entitled to the State Pension. Further plans mean it’s expected to reach 67 in the next decade. As life expectancy rises, it’s likely that further increases to the State Pension age are on the horizon.
There have also been changes to the State Pension itself. The new State Pension system affects those reaching State Pension age on or after 6 April 2016. The amount you receive under the new system is dependent on the number of National Insurance (NI) credits you have.
Checking your State Pension
Luckily, it’s relatively simple to check your State Pension.
The government’s calculator lets you check when you’ll reach State Pension age and provides a state pension forecast. You can find the tool here.
There have been several news stories recently that have highlighted the importance of understanding your State Pension.
Women born in the 1950s have been affected by the equalising of the State Pension, leaving some struggling financially as they were unprepared or uninformed of the changes. It’s led to a campaign group representing women affected urging the government to give women born in the 1950s the State Pension they would have received if the changes had not occurred. It’s a situation that’s currently under judicial review following a High Court ruling.
You may also have heard of parents having less NI credits than expected due to not applying for Child Benefit when they were taking time off work or working reduced hours to raise children. To maintain a NI record when bringing up children, parents must apply for Child Benefit, even if they opt out of receiving child benefit payments to avoid the High Income Child Benefit Tax Charge. It means some parents could receive less State Pension than anticipated.
As a result, keeping track of your State Pension age and projected income is crucial for effectively planning your retirement.
Why your State Pension age is important
Even when you’ve made other retirement provisions, your State Pension age is crucial.
For many, the State Pension offers a foundation to build your retirement income on. It can provide a base level of income and security as you enter retirement. Your State Pension is likely to be an important part of your financial plan as you give up work, whether you want to wait until your State Pension age, retire early, or even continue to work. It’s a factor that should inform the decision you make about other income streams and your overall retirement aspirations.
If you’d like to discuss how your State Pension age affects your retirement plans, please contact us. We’ll help you put your projected State Pension income into the context of your wider retirement goals and other provisions you’ve made.