Chapters Financial News

The State Pension has been in the news regularly over recent times for a number of reasons. It's something of a hot potato for political parties, as changes to this valuable benefit will directly affect the age group that tends to have the highest voter turnout. The cost burden to the government is high, forecast to be £125bn in 2023/2024 (source: OBR), so it's a significant benefit to maintain.

Let's not forget that the State Pension is the bedrock of many retired household incomes, with the income paid being protected against inflation, as you will see. Those qualifying for a full new State Pension will receive £203.85 per week from April 2023, up from £185.15. The State Pension is paid gross but is taxable.

What have been the recent issues to contend with?

The triple lock – inflation protection

One recent topic was the 'will they / won't they' speculation around whether the 'triple lock' would be reinstated. Under this system, the State Pension increases every April in line with the highest of three measures:

• Inflation (as measured by the Consumer Prices Index / CPI in the September of the previous year)
• The average increase in wages across the UK
• 2.5%

The triple lock was temporarily suspended owing to the pandemic and reinstated for the 2023/2024 tax year. This meant that the State Pension rose in April 2023 in line with the September CPI rate – 10.1% - which was the biggest ever increase to the State Pension.

State Pension age increase deferred

The current State Pension age is 67. In late March 2023, the government confirmed that a proposed rise in the State Pension age to 68 would not be brought forward…yet.

Under current plans, those born on or after 05 April 1977 will be the first section of the population to work to 68. A 2017 government review had suggested expanding this to include those born in the late 1960s.

However, a recent report found that life expectancy for retiring people is now two years lower than when the State Pension age was last reviewed, in 2017. A decision is now expected in 2026.

Check your State Pension forecast

Accruing the maximum State Pension you can is important, and this is achieved after 35 years of National Insurance contributions under the new State Pension rules, or equivalent accrual for those who have built up contributions before 06 April 2016. So checking you are up to date or on course is usually important. Normally, you can take action if you fall short.

We are advocates of checking an individual's State Pension as it is accrued and if you have not achieved this recently, this can be checked online here: https://www.gov.uk/check-state-pension

This might reveal some gaps in your National Insurance contribution (NIC) record, and it is possible to make voluntary contributions to top up your State Pension entitlement.

Topping up your State Pension – deadline extended to 05 April 2025

The deadline for people to fill gaps in their NIC record has been extended to ensure that they can maximise their State Pension entitlement. The original deadline was 05 April 2023 to make voluntary contributions for gaps between 2006 and 2016 – however, this was extended to 31 July 2023 and subsequently to 05 April 2025.

The surge in calls to HMRC to meet the original deadline left phone lines blocked and people unable to get through.

Before you top up, it's important to check that this will add value – do talk to an appropriate adviser to make sure additional contributions will a) boost your pension and b) offer value in your circumstances.

Much to consider

As you can see, the State Pension has been highly topical in recent times. However, this does not diminish its real value, and I hope this blog provides some insights into what you might want to consider in making sure your eventual pension is up to date.

No individual advice is provided during the course of this blog.

Vicky Fulcher
Director
CFP^TM Chartered MCSI

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