Despite recent revamps, questions remain over the effect the state pension has on people’s retirement planning.
Financial journalist John Fitzsimons looks at when the pension age is likely to increase again and how savers can supplement their state pension.
For many of us, the state pension is a key part of our financial retirement planning. The new state pension was introduced in 2016, and for the 2019/20 tax year pays up to £168.60 per week, although the amount you actually receive may vary depending on your history of national insurance contributions. If you’ve paid national insurance for less than 35 years, you’ll receive a smaller state pension.
Despite this recent restructuring of the state pension, questions remain over just how likely it is that the pensioners of tomorrow will actually receive help from the state in their later years.
The earlier you begin, the better the long-term returns, and you should increase your contributions as your pay rises over time
Paying close attention to how your pension funds are being invested is important too, so that you can track performance.
‘It is important that you review your pensions, ISAs and other assets you’ll be relying upon in retirement on a regular basis,’ explains Patrick Connolly. ‘You should get a statement from your pension provider either annually or every six months, which will give you an up-to-date valuation of your pension.
‘Also, make sure your pension isn’t too expensive. You need to understand how much you are paying your pension provider and how much you are paying on any underlying investment funds. You should be able to get this information from your pension provider.’
Jon Thorpe notes that it’s all a question of informing people why they need to save more for their later years.
‘Auto-enrolment is a start, but the media, politicians and the pensions industry need to do more to educate people about the need to save more if they are to enjoy a reasonable standard of living in retirement,’ he explains.
You can get a state pension forecast, which outlines what you are likely to receive in retirement, from the government’s website, or by calling 0800 731 7898. You may also be able to make extra national insurance contributions to make sure that you receive the full state pension.