How to make the most of your State Pension

Your State Pension is unlikely to be your main source of retirement income but you’ll want to receive your full entitlement.

The Department for Work and Pensions (DWP) recently extended an April 2023 deadline, meaning that you now have until 31 July to plug any gaps in your National Insurance record going back to 2006.

From August, you will only be able to pay voluntary National Insurance contributions (NICs) to fill gaps from the last six years.

The deadline extension is a great opportunity to ensure you make the most of your State Pension. But how much might you receive and is paying voluntary NICs worth it?

Keep reading to find out.

The State Pension Age is currently 66 but it is set to rise

The State Pension has been in the news lately. Not only has the DWP deadline extension made headlines, but so too has the State Pension Age and the triple lock.

Legislation is in place to allow a phased increase to the State Pension Age – currently 66. Between 2026 and 2028 this is set to rise to 67 before rising again to 68 between 2044 and 2046.

A government review from 2017 is looking into pushing the second rise forward to the late-2030s, but the decision on this has now been delayed until after the next election.

The government’s decision to honour the triple lock has seen a huge rise in the State Pension

For the 2023/24 tax year, the full new State Pension is £204 a week, or £10,600 a year.

This increased amount is due to the State Pension triple lock that promises to increase the State Pension each year in line with the higher of:

• 2.5%
• Average earnings growth
• Annual price inflation, as measured by the Consumer Prices Index (CPI).

Back in 2021, an anomaly caused by the coronavirus pandemic and the government’s Job Retention (or “furlough”) Scheme saw average earnings growth soar. Rather than increase the State Pension by this artificially inflated figure, they opted to scrap the triple lock.

In 2022, the government had a different headache. With inflation peaking above 11%, it was the CPI that would determine the State Pension rise.

After much speculation, the Treasury finally announced that the triple lock would be reinstated and the increase in line with inflation honoured. That meant a 10.1% boost to your State Pension.

To receive the full State Pension amount, you’ll need 35 “qualifying years” of National Insurance credits on your record. If you have between 10 and 35 years of contributions, you’ll receive a State Pension amount based on the number of qualifying years. Less than 10 qualifying years and you won’t receive a State Pension at all.

You should check your current State Pension entitlement now to see if you have a shortfall, and if you do, speak to your Logic adviser.

Remember too that the calculation will assume continued contributions up to your State Pension Age. If you stop work early, you may need to continue paying National Insurance contributions until you reach your 35 qualifying years.

Increased demand has jammed DWP phone lines 

The option to fill National Insurance gaps back as far as 2006 has proved extremely popular, jamming DWP phone lines and forcing them to extend the deadline to July.

Making the most of this extension to maximise your State Pension entitlement could make a huge difference to your retirement.

As we said earlier, the State Pension might not be your main source of retirement income but it is a great base from which to build. The regular and inflation-proofed income could allow you to enjoy greater flexibility with the other pensions you hold so get in touch if you want to check in with your entitlement.

Get in touch 

At Logic, we keep on top of legislative changes so that the advice we offer you is always up to date and based on the latest rules. If you have any questions about the current financial climate or your long-term retirement plans, speak to us now. Please email us at info@logicfinancialservices.co.uk or check with your adviser. 

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.