Martin Lewis explains state pension five-year rule | Personal Finance | Finance
Martin Lewis has explained the rules around the state pension (Image: ITV)
Money expert Martin Lewis has spelled out the rules on the qualifying criteria for the state pension. The advice came in response to a listener’s query on his latest BBC podcast. The person wanted some guidance as they were planning for their retirement.
The person explained that they were looking to stop working but had not yet reached the state pension age. They had consolidated all their personal pensions and were also looking at their state pension payments as part of their retirement financial planning.
Currently, you can begin claiming your state pension when you turn 66. The state pension age is increasing from this April, going up in stages to reach 67 by April 2028. The full new state pension currently provides £230.25 per week, or £11,973 annually. These payments are set to increase by 4.8 percent next April, in accordance with the triple lock policy. This will raise the full new state pension to £241.30 per week, or £12,547.60 annually.
The listener said that they had used the HMRC app to check their payment entitlement and it seemed they were on track to receive the full new state pension. Your entitlement is accumulated through aying National Insurance (NI) contributions.
The would-be retiree asked Mr Lewis whether ceasing work and thus stopping National Insurance contributions could impact their state pension entitlement. They enquired whether they should continue making contributions to preserve their entitlement to the full sum.
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Mr Lewis responded by explaining a general principle: “You generally need 35 years-ish, and it is a huge capital letter ‘ISH’, to get the full state pension. 35 years-ish of National Insurance contributions and then you get the full state pension when you hit retirement age.”
Typically, 35 years of complete NI contributions are required to receive the full new state pension. This differs from the older, basic state pension scheme, where people generally need 30 years of contributions to qualify for the full amount.
It’s important to note that you must apply for your state pension to begin receiving payments. The payments don’t kick in automatically upon reaching state pension age. Some people opt to defer claiming their state pension beyond their qualifying age, meaning they may get higher payments when they eventually submit their claim.
Continuing his answer, Mr Lewis said: “But there are so many different factors here. What you do is you rely on the forecasts that you can get on gov.uk that will show you both any missing National Insurance years and it will also show you what you are projected to get.”
You can get your state pension forecast using a tool on the Government website. Mr Lewis said the forecast should provide you with two figures: your state pension entitlement based on your current National Insurance (NI) contributions and an estimate of what your entitlement will be if you continue to pay NI.
The caller confirmed that the forecast indicated they were on track to receive the full amount, based on their current contributions. Despite these promising figures, Mr Lewis cautioned that the system is “complicated” and he couldn’t offer any “cast-iron guarantees” regarding the exact amount the listener would receive when they put in their claim.
A date for your diary
However, he did clarify a simple principle to bear in mind. Mr Lewis said: “If you stop work now, you can always buy back up to six years of past National Insurance contributions. So stop work, carry on with your life, and then make sure you put a note in your diary, sending yourself a delayed email, however you tend to it, for about five years’ time, to go and check this process and see where you are again.
“If at that point, something has changed, so it looks like you’re no longer on for the full state pension, then I would buy back one of these missing years.” If you wanted to set a reminder for yourself to check this in five years’ time, you would want to make a note for around January 2031.
In contrast, Mr Lewis issued a warning not to do something given the caller’s situation. He said: “What I certainly wouldn’t do with what you’ve told me, is be buying years just now in case you don’t need to.”
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