If you're approaching retirement soon, finding out much State Pension you'll receive will likely be one of your considerations.
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The Government's plans to introduce a new flat-rate State Pension of £144 a week from April 2017 means it's a far simpler calculation for people retiring after that date. If you've paid a minimum of 35 years' worth of National Insurance contributions then you'll get the full pension. If you've paid at least ten years' worth, then you'll get some pension – how much depends on how many years' contributions you've made.
The State Pension age will also change to 66 for both men and women by 2020 and 67 by 2028. At least that's the plan curently. Of course, this could all change, particularly if the Labour Party wins the 2015 General Election outright.
If you're retiring before 6th April 2017, the situation is a lot more complex. Read on to find out more.
Basic State Pension
You must have paid at least a year's worth of National Insurance contributions by working or have received a year's worth of credits (for example if you've received benefits, been ill or been a carer) to receive any Basic State Pension. If you've paid 30 years' worth of National Insurance contributions or received 30 years' worth of credits, you'll get the full Basic State Pension, currently £107.45 a week. If you have fewer years of contributions or credits, you'll receive less.
If you're not eligible for a Basic State Pension or not receiving the full amount, you might be able to 'top up' to £64.40 a week through your spouse or civil partner's National Insurance contributions.
If you don't have enough contributions, you may also choose to pay voluntary contributions to top them up. You'll usually be sent a letter by HM Revenue & Customs if there are gaps in your history.
If you want a quick estimate of when you'll receive your State Pension and how much you'll get, you can use GOV.UK's State Pension Calculator.
If you haven't been working, for whatever reason, you can check how many credits you've accrued by requesting a National Insurance statement from the HMRC website, calling 0845 302 1479 or writing to:
HM Revenue & Customs
Benton Park View
Newcastle upon Tyne
SERPS/Second State Pension
You may also have paid into the State Earnings-Related Pension Scheme (SERPS) and/or the Additional, or Second State Pension. SERPS was replaced by the Second State Pension in 2002.
The Second State Pension provides additional money to workers (based on National Insurance contributions), carers and people with a long-term disability or illness. If you fit one of those criteria, you will have contributed to your Second State Pension unless you 'contracted out' and paid into an occupational or private pension scheme instead.
If the 2017 pension changes go ahead, then the Second State Pension will be abolished and new retirees will receive the flat-rate Basic State Pension.
For an estimate of your Basic State Pension and Second State Pension, you'll need to request a detailed State Pension statement from the Pension Service website.
To use this, you'll need to register with the Government Gateway, and you'll be sent an activation code in the post.
Pension Credit is paid out to people who have a low retirement income. There are two elements – the Guarantee Credit and Savings Credit. The Guarantee Credit is a weekly retirement income of less than £142.70 (for single people) or £217.90 (couples). Savings Credit is an additional element for people who have some savings. This is currently worth up to £18.54 a week for single people and up to £23.73 for couples.
Make sure you claim this if you're entitled to it – the Government estimates that 1.8 million people currently don't. The Savings Credit element is due to be scrapped in 2017.
If you think you might be eligible for Pension Credit, then you can get an estimate from GOV.UK's Pension Credit calculator.
Note that if you've not reached the Pension Credit qualifying age (60), you should enter 1st January 1950 as your date of birth.
Seven retirement nightmares
How to get a State Pension forecast
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.
Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).
Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.
Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.
Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.
The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.
The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.