Andy Burnham's pledge to reform the triple lock State Pension policy means those who have yet to retire will need to build a bigger private or workplace pension pot. The Prime Minister wants to tweak the policy to pay for his social care plans, telling Labour's conference that pensions would rise either by CPI inflation or a minimum of 2.5% from April 2030. Under the current set-up, the State Pension rises annually by the highest of inflation, average earnings growth or 2.5%.
He claimed the pension would hold its value relative to earnings over time, but his comments have led experts to advise those who can to boost their contributions.
Check your National Insurance record
Maike Currie, Vice President of Personal Finance at PensionBee, told the Daily Express: "If you’re worried about what the change to the triple lock regime means for your retirement, there are some simple things you can do now to boost your retirement income. First and foremost, start by checking your State Pension forecast. Make sure you know how much you’re on track to receive and whether you can fill any gaps in your National Insurance record."
Your National Insurance record helps determine how much State Pension you receive, so any gaps in your track record can prove expensive. You may be entitled to NI credits for periods when you weren’t paying National Insurance, for example because you were caring for children or another adult, unemployed or unable to work. Some credits are awarded automatically, while others need to be claimed, so checking your NI record well before retirement is an important piece of financial housekeeping.
You can check your NI record online at gov.uk, where you can see what you have paid up to the current tax year and any credits you have received. It will also be possible to see if you can pay voluntary contributions to plug any gaps and how much these will cost. You can also apply for a printed NI statement by writing to HMRC. To receive the full new State Pension you need 35 qualifying years.
Maike said: "Gaps in your National Insurance record can frequently be plugged for free through various credits, which dramatically boost your eventual safety net. For instance, individuals who care for a family member under the age of 12 before reaching State Pension age can manually claim ‘specified adult childcare credits’. Make sure you proactively claim these credits as it can boost your State Pension without costing you a penny."
Consider deferring your State Pension
Maike said: "You don’t have to claim your State Pension as soon as you reach State Pension age. Instead you could choose to defer it."
PensionBee's expert explained there are three ways to receive a deferred State Pension. This includes taking up to 52 weeks’ worth (with no interest added) as a one-off arrears payment. Maike said: "So if you defer the full new State Pension for a year, that would be £12,547.60."
Or you can take increased regular payments instead, worth 1% more for every nine weeks deferred, which on the current £241.30 a week is worth an extra £13.99 a week for life, according to Maike, who added: "Alternatively you can take some combination of the two."
She said the main trade-off is between getting cash now and securing a higher income for life. "Taking a one-off payment gives you more flexibility and access to the money upfront, while taking the increased regular payments provides a higher regular income for the rest of your life. You can also combine the two, giving you some cash now while still increasing your regular payments. The right option will depend on your circumstances, including your tax position, how long you expect to live and whether you need the money upfront."
Boost your workplace pension
Maike's third tip is to check your workplace pension. She said: "Auto-enrolment minimums are a floor, not a target. If your employer matches extra contributions, increasing yours can be a particularly effective way to build your savings."
Auto-enrolment involves employers automatically enrolling eligible staff into a workplace pension. Employers and employees pay in a certain percentage each month, with a bit extra gained in tax-relief.
Maike added: "Beyond the State Pension it’s worth considering bringing old pensions together. This can make it easier to see what you have and whether you’re saving enough. Dig out old paperwork, contact former employers and use the Government’s free Pension Tracing Service to find contact details for schemes you may have lost touch with."
PensionBee data highlights that there are at least 4.8 million lost pension pots in the UK, with nearly one in 10 workers believing they have misplaced a pot worth over £10,000. In total, an estimated £50billion in retirement savings sits unclaimed across the country.
Claim Pension Credit if eligible
Maike urged retirees or those nearing retirement to also check Pension Credit, adding: "You could be entitled to extra support if you’re on a lower income. Pension Credit is one of the most valuable benefits going unclaimed."
Historically, only around six in 10 of those eligible have claimed it, meaning many pensioners could be missing out on thousands of pounds a year. And it’s not just the Pension Credit itself.
She added that claiming Pension Credit can unlock other valuable help, including Winter Fuel Payments and support with housing and health costs. Maike said: "Eligible households have previously received an average boost of around £3,390 a year - money that could make a huge difference to someone struggling to make ends meet in retirement."
