The full State Pension will rise by almost £290 from April, meaning recipients will soon pocket over £9,500 a year.
But regardless of whether you’re nearing State Pension age or not, did you know that there are steps you can take right now to improve your chances of a comfortable retirement?
Here’s what you need to know.
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State Pension boost 2022: what is happening?
The full State Pension is paid to those who’ve made 35 years of qualifying National Insurance contributions. If you don’t make 35 years’ worth of payments, you’ll qualify for a smaller proportion of the pension, as long as you have at least 10 years’ worth of payments under your belt.
The State Pension age is currently 66 for both men and women, though it’s due to rise to 68 before 2039.
The government announced in December that the full State Pension will rise by 3.1% in April, taking the maximum full payment up to £9,628.50 per year. That’s an extra £5.50 every week.
While it’s an increase, the 3.1% rise has been widely criticised given that the government decided to suspend its ‘triple lock’ promise this year. The triple lock is a guarantee that the State Pension will rise by the greater of:
- Average earnings
- Prices measured by the Consumer Prices Index
- 2.5%
This means those on the State Pension would have enjoyed a rise in excess of 8% had the triple lock applied this year. In fairness to the government, this huge rise would have been due to the large increase in ‘average earnings’ seen in 2021. It’s widely accepted that this figure is somewhat skewed by those returning to work following the initial waves of the pandemic.
How can you boost your State Pension?
If you aren’t expecting a State Pension boost in two month’s time, it’s still worth knowing that you can take steps now to ensure you’ll qualify for the maximum amount when you do get to retirement age.
1. Check your National Insurance contributions
If you’re unsure as to how many years of National Insurance contributions you’ve made, you can check. You can do this on the Gov.uk website.
Hopefully, you’ll get the peace of mind that you’re on track to pocket the full State Pension. If not, then all is not lost.
2. Consider making voluntary contributions
If you’ve missed National Insurance payments, then you can make up for them by making voluntary contributions. You can do this for the past six years. However, the deadline for this is 5 April each year, so it’s best to get your skates on given that 5 April 2022 isn’t too far away.
Making voluntary contributions may also be a wise move if you’re currently unemployed, or are self-employed but don’t earn enough to be liable for contributions. Remember, you’ll need 35 qualifying years of payments to get the full State Pension.
3. Check whether you’ve had Child Benefit
When you claim Child Benefit, you can qualify for National Insurance contributions. This applies even if you aren’t in work until your youngest child is 12.
So if you receive (or have received) Child Benefit, it’s worth checking to see whether you’ve been credited with contributions.
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How can you boost your private pension?
A private pension is totally different from the State Pension. A private pension belongs to you, with no input from the state. Here are three tips to boost yours.
1. Increase your contributions
If you have an auto-enrolment pension, you typically pay in a percentage of your salary each month. Your employer will also make a contribution.
The minimum your employer must contribute is 3% of your gross salary, while you must top this up to ensure your overall contribution is at least 8%. Some employers will offer to match your contributions above 3%, so it’s worth finding out. Any additional contributions you make will boost your pension pot.
2. Consider opening a SIPP
A self-invested personal pension or SIPP is a DIY pension where you can pick and choose investments yourself. Importantly, SIPPs can give your pension pot a big boost if you’re already paying the maximum allowed into your company scheme.
SIPPs typically offer a wide choice of investments and are available from a number of investing platforms, such as Hargreaves Lansdown.
3. Think about when you want to give up work
Your private pension pot will have to sustain you for the duration of your non-working days. As a result, it’s vital your pension pot is big enough. While it’s a decent idea to save as much as you can into your pension, it’s also worth considering when you want to give up work.
The longer you continue to work – even if it’s just part-time – the longer your pension pot is likely to support you. In other words, you can give your pension a boost by delaying your full-time retirement.
Need more pension-boosting tips? Take a look at The Motley Fool’s latest retirement articles.
