State Pension - Will you work until you drop?

Posted on: 02 July 2010 by Editor at Large

Being eligible for a State Pension isn’t quite as straightforward as it used to be. Get up to speed with recent changes to the system.

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Time was, we worked all our lives from 16 to 64 (60 for women), picked up our gold watches, lifted our pensions and then passed away a few years later. These days, thanks to advances in medicine, a better diet and generally taking better care of our bodies, we are living longer. Some retirements last 20 or even 30 years.

Good news for everyone except the treasury. With more of the post-war ‘baby boom’ generation retiring, there are progressively fewer young people in the labour market paying National insurance contributions.

 That means that there is going to be a massive shortfall in the cash available to support us in the coming years.

One solution is that we will be expected to work longer. The State Pension Age (SPA) will rise to 66 for both men and women over the next 15 years. It will be 68 by 2046.Many people may continue to work into their 70s. Rightly or wrongly, we will be expected to do more. Now is a good time to think long and hard about the years ahead.

Start by answering these five basic questions.

1: When can you retire?

The age you can claim your State Pension will be determined by when you were born. The age is 65 for men born before 6 April 1959. For women born on or before 5 April 1950, it is 60. From 6 April 2020 the SPA will be 65 for both men and women. By April 2046, the SPA will be 68.

2: How much will you get?

You need to have paid 30 years worth of National insurance contributions to qualify for a State Pension. The State Pension Profiler on the Department for Work and Pensions (DWP) website will show how many years of National Insurance contributions you have made and the amount of State Pension you can expect to get. If you have gaps in your work record you may be able to buy back some ‘years’ to boost your pension cash.

3: Should you work past State Pension Age to top up your income?

Over 1.4 million people already work past the SPA.  If you do decide to work longer, you won’t need to pay any more National Insurance contributions and you could also pay less tax on what you earn. Talk to your employer about options for staying-on or for working part-time.  Retraining is also an option. If your current job is too physically demanding. Find out if you could retrain to move into the administration side.

4: Could you take your State Pension later to boost your later life funds?

Deferring your State Pension for a year could mean a cash lump sum with up to 10 per cent interest.  

5: Am I owed money from lost personal or work pension pots?

Most of us have moved around several jobs in the course of our careers. You may have paid into company pension schemes for a short time and forgotten about them. Those small amounts can really add up and make a difference in retirement. There is around £3 billion currently unclaimed in pension accounts.  See the free Pension Tracing Service website or call on 0845 230 2928 to uncover any forgotten personal or work pensions. 

You can get more information on the State Pension and your retirement options at the DWP website.

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