The state pension qualifying rules are changing this year
Martin Lewis has issued some guidance about the qualifying rules for the state pension. The financial journalist set out the fine details of how the DWP payments work after a call-in to this BBC podcast. The listener called in to ask for his thoughts as they were planning for their retirement.
The person explained that they were looking to stop working soon, but they had not yet reached state pension age. They had consolidated all their personal pensions and were also factoring in their state pension payments as they calculated their retirement finances. You can currently start claiming your state pension when you reach the age of 66.
The state pension age is increasing from this April, going up in stages to reach 67 by April 2028. The full new state pension currently pays £230.25 a week, or £11,973 a year. Payments are set to go up 4.8 percent next April in line with the triple lock policy. This will lift the full new state pension up to £241.30 a week, or £12,547.60 a year.
The listener said that they had checked through the HMRC app and it appeared to show they were on track to receive the full new state pension. You build up your entitlement through paying National Insurance (NI) contributions. The person asked Mr Lewis, as they were planning to stop working and no longer make National Insurance contributions, could this affect their state pension entitlement.
A huge caveat
They asked if they should still make some contributions to maintain their entitlement to the full amount. Mr Lewis said in response: “You generally need 35 years-ish, and it is a huge capital letter ‘ISH’, to get the full state pension. 35 years-ish of National Insurance contributions and then you get the full state pension when you hit retirement age.”
You typically need 35 years of full NI contributions to get the full new state pension. This is different from the older, basic state pension. Those on this scheme typically need 30 years of contributions to get the full amount. It’s worth noting at this point that you do need to apply for your state pension to start receiving the payments.
They do not automatically start being paid out once your reach state pension age. Some people choose to defer getting their state pension beyond their state pension age, so they can get more when they do eventually put in their claim.
Mr Lewis continued with his answer: “But there are so many different factors here. What you do is you rely on the forecasts that you can get on gov.uk that will show you both any missing National Insurance years and it will also show you what you are projected to get.”
You can get your state pension forecast using a tool on the Government website. The finance expert said that the forecast should give you two numbers: your state pension entitlement based on how much NI you have paid to date and an estimate of how much your entitlement will be based on if you keep paying NI.
The caller confirmed that the forecast had indicated that they were on track to get the full amount, based on their current contributions. Despite these promising projections, Mr Lewis warned that the system is “complicated” and he couldn’t give any “cast-iron guarantees” for how much the listener would get when they eventually get.
A date for your diary
But he did explain an “easy” principle to note here. Mr Lewis said: “If you stop work now, you can always buy back up to six years of past National Insurance contributions.
“So stop work, carry on with your life, and then make sure you put a note in your diary, sending yourself a delayed email, however you tend to it, for about five years’ time, to go and check this process and see where you are again.
“If at that point, something has changed, so it looks like you’re no longer on for the full state pension, then I would buy back one of these missing years.” If you wanted to set a reminder for yourself to check this in five years’ time, you would want to make a note for around January 2031.
Mr Lewis added a word of caution to avoid something: “What I certainly wouldn’t do with what you’ve told me is be buying years just now in case you don’t need to.”
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