One in five people retiring this year told researchers they intend to rely solely on their state pension to fund their retirement
The Department for Work and Pensions confirmed earlier this week that the age to qualify for state pension is set to rise. This means that many people in the UK will have to wait longer until they are able to claim the payments.
A recent survey by ABRDN revealed that one in five people who plan to retire this year will be relying on their state pension as their principle source of income. The same report discovered that only a quarter of those questioned are confident they have save enough money.
Investment experts also found that 66% of older people will continue to work, despite reaching retirement age. And, of these, 22% said that they had little choice due to the cost-of-living crisis.
The research, which involved 2,000 recent and soon-to-be retirees, was carried out by global investment company abrdn. Paul Titterton, a digital retirement advice expert at the firm said: “It’s worrying enough that one in five people are intending to rely solely on the state pension to fund their retirement, but this is happening at a time of high inflation and the cost-of-living crisis, meaning we are likely to see a growing retirement poverty gap.”
What is the current state pension age
The current retirement age stands at 66 for both men and women, but it is due to rise by another two years. In the meantime, it’s worth knowing when you will be able to start claiming your state pension – and how much you will get.
An outline of the current rules is available on the government’s Gov.UK website. There is no longer a ‘default retirement age’ forcing people to retire at the age of 65. .
As things stand, Brits can start collecting the New State Pension – if they are a man born on or after April 6, 1951, or a woman born on or after April 6, 1953. But if you reached state pensionable age prior to April 6, 2016, you will be paid under the old rules, known as the Basic State Pension.
To qualify for a state pension you will need to have paid in at least 10 years’ worth of National Insurance contributions. These, however, do not have to be consecutive years, but 10 years in total. As well as through work, they also include credits through unemployment benefits, illness or if you have been a parent or carer.
They also include voluntary contributions, and anyone who has lived abroad may also still be able to receive some state pension. Others who may qualify include anyone who has paid married women’s, or widow’s, National Insurance contributions at a reduced rate.
How much will I get?
Those eligible for the New State Pension will get £185.15 a week, but the actual amount will depend on your National Insurance record. It can be more than this if you have more than a “certain amount of Additional State Pension” or delay your state pension to continue working.
Some pensioners who are on a low income when they reach pensionable age could also qualify for Pension Credit. This could also aply even if you have savings. The new state pension is paid in arrears, similar to most wages, every four weeks into you bank account. The first payment will normally be within five weeks of turning 66.
The full Basic State Pension is £141.85 per week, but you could also receive more if you are eligible for additional state pension or delay claiming it by continuing to work. Recipients will usually have to have paid in a total of 30 years of National Insurance contributions or credits.
Anyone who has less than 30 years’ worth of NI payments will receive less than the £141.85 per week. The amount can usually be increased, once again, by paying voluntary contributions.
There are ways to increase the amount of basic state pension you will get. They include delaying claiming your pension, which will increase in value by 1% every five weeks it is not drawn upon. You can also claim more if you are married, or in a civil partnership.
Mr Titterton, of abrdn, said it is “crucial” for everyone approaching state pension age to carefully consider their financial situation, especially with the cost-of-living crisis the country is facing. “While the state pension is a vital part of funding retirement, it’s crucial that retirees also weigh up any other savings and assets that they may have on making the decision on whether they can afford to retire, including any funds they have built up through auto-enrolment at work.”