Bridging the state pension gap

bridging the state pension gap

For many people, retirement might seem a long way off. But there’s a growing concern about the disparity between people leaving work and then having to wait for their state pension to begin. Depending on the measures you put in place today, bridging the state pension gap might not be quite as daunting as expected. It’s all about applying the right level of planning.

Over recent years, there has been an increase in the number of people deciding to take early retirement. According to research carried out by Legal and General, back in 2021, it was estimated that 1.3 million people decided to retire as a result of the pandemic.

Let’s answer some common questions about the state pension and what to consider.

When will I receive my state pension?

For many of us, we won’t receive our state pension until we reach age 66 or 67. The State Pension Age Review by the Department of Work and Pensions, however, has recommended a further review of the pension age in the next two years. There is a possibility that for some age groups the pension age might rise to 68.

The government has to consider the growing number of people over the state pension age, and the sustainability of providing them with a state pension. The recent review included analysis from the Government Actuary. This looked at average life expectancy and the proportion of adult life spent in retirement. As people are living longer, they are spending a longer time in retirement.

For those people born in 1960, for example, the average life expectancy in that same year was around 70 years. Compared to today, people are expected to live well into their eighties, which is a significantly longer length of time spent in retirement.

And if you plan to leave work early, around the age of 60 or before, this can create a lengthy income gap before you can claim your state pension. You will need to rely on savings or other types of pension income during this period. It’s worth bearing in mind that the age when you can draw from a private or personal pension will rise to 57 years from 6 April 2028. This will apply to people born after 2 April 1971.

How much state pension will I get?

At the time of writing, the full state pension rate is £203.85 per week. This equates to £10,600 per year. The amount of income you are likely to receive will depend on your National Insurance contributions (NICs).

You need to have made 35 years of contributions throughout your working life to ensure you’re eligible for the full state pension. There are some instances where there might be gaps in your NICs. Often this is due to low earnings, unemployment, working abroad or taking time away from work, such as traveling. Many working women have gaps in their pension savings due to taking time off to look after children.

If you need to check your state pension forecast, you will need to register with the Government Gateway. Use this link:

The government has recently announced an extension to the deadline for topping up your NICs. You now have until April 2025 to make up any shortfall in your National Insurance record. It’s important to make sure you have made enough contributions, so you can claim the full rate of your state pension when you come to retire. For more information, please read our blog How do I find out if I have underpaid my state pension?

For any other type of pension, you should receive an annual report showing your forecasted income on retirement age. The date when you can draw from a private or personal pension will differ depending on the scheme. So, this time frame is also factoring this into your plans.

Pension income planning

Planning the amount of pension income you will have to live on is the key to a happy retirement. Keep up to date with your National Insurance contributions and consider opening a personal pension for financial security; there are different options available. The earlier in life you start paying into a pension, the more financially secure you should be.

If you have a workplace pension, you might be able to make additional contributions. If you are a working woman, it’s recommended to keep paying into a workplace pension while you are on maternity leave. You might also be eligible for National Insurance credits for any unpaid maternity leave.

Understanding your future pension income is an important part of the retirement planning process. It’s important to know if you will have enough to last you throughout your retirement, along with any other savings, investments, and capital.

Our financial planning team will carry out a review of any existing pensions. We will also advise you on any suitable measures that could make your money work harder for you.

Do you need a pension review? Get in touch to speak to our financial planners.