How to make the most of the state pension

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

If someone offered you an investment opportunity with “guaranteed, high returns”, you would be right to question their claim. Whether it’s bonds, stocks or property – all investing has an element of risk. Yet perhaps there is one “investment” which gets fairly close to being an exception. The UK state pension offers individuals a lifetime income in retirement, rising in line with inflation via the “triple lock” system. You do not need to worry about your state pension income falling due to a crash in the stock markets, or the rising cost of living eroding its spending power. Of course, government policy could change the state pension rules down the line – a distinct possibility, but highly unlikely to become a reality any time soon.

Despite its many benefits, however, millions within the UK are still not making the most of them. In this short guide, our Oxford financial planning team here at WMM offers some thoughts on how to get the best state pension deal for your retirement plan.


Maximising your entitlement

In 2020-21, the full new state pension is worth £9,110.40 per year. To receive any state pension at all, you need at least 10 years of qualifying National Insurance Contributions (NICs). To get the full amount, you need at least 35 years. These are normally paid automatically via PAYE (i.e. done by your employer), and is very possible to achieve over a working life.

The first step, therefore, is to assess your current NIC record via the government’s website – and how many more qualifying years you need to receive the full state pension. If, for instance, you have 25 years already under your belt, then you only need another 10 years. Even later in your career – say, at age 55 – this is possible to achieve. For those in committed relationships, the second step will be for your partner/spouse to check their own NIC record. Remember, they get their own state pension, so combining the future incomes of two full state pensions in retirement should significantly improve your lifestyle later.


What if my NIC record is incomplete?

For those in their 50s and 60s, it might be that their NIC record only has 10, 15 or 20 qualifying years. It may be difficult, therefore, to achieve the 35 years required to get the full new state pension purely by continuing to work until they reach their state pension age. In these cases, we recommend speaking with a financial adviser to explore ways to get the best possible deal in your own case. Some ideas to consider may include:

  • Voluntary NICs. It is possible to “top up” incomplete previous tax years. For instance, suppose you check your record and see that 3 years are missing, where you could make voluntary NICs. The rate for ‘Class 3’ NI in 2020/21 is £15.30 a week – i.e. a total of £2,386.80. This might sound like a lot, but making the voluntary NIC could, over the course of retirement, result in extra state pension income which far exceeds it.
  • Working longer. The state pension age is expected to rise to 67 by 2028 and 68 by 2039. However, you could keep working for a few more years after this to build up your state pension a bit more.
  • Checking missed entitlement. Women who reached state pension age before April 2016, in particular, may be missing out on £1,000s of state pension benefits. In one case, this resulted in a woman being able to claim £82,000 in back-dated entitlement. The rules here are complex, however, so consider seeking professional advice to see if this may apply to your circumstances.



Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM. 

You can call us on 01869 331469