Martin Lewis discusses checking state pension underpayments
State Pension age for most is currently set at 66, after a recent change in the government’s policy. However, the increases are not set to stop there, and it is expected this age will keep rising in the coming years. But a recent briefing note from the Pensions Policy Institute (PPI), appears to suggest other approaches are worth considering.
The report acknowledged a single state pension age implemented nationwide is “easy to implement”, but that issues of life expectancy are also vital to take into account.
This perspective came as analysis showed the gap in life expectancy between the most and least deprived people in Britain grew by eight percent between 2012 and 2017.
Put forward in the report were suggestions of putting into place different state pension ages dependent on the area a person lives in, or their earnings.
However, the PPI stated this could create a more complex situation, which may also raise issues of fairness.
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It stated: “With the government’s six-year review of state pension age to be conducted by July 2023, issues of longevity and health inequalities are important to ensure that the effects of any changes are distributed fairly among the population.
“The policy options available, which could potentially mitigate some of these issues, each have their own downsides meaning that careful consideration is required before being implemented within the UK.
“As longevity and health inequalities begin before retirement, policy changes to state pension age only represents part of the solution.
“Policy changes targeted at individuals before retirement, such as a lower pension credit age, or policies which can better aid lower earners either through the tax system or health services can be used in tandem with changes with state pension age to help reduce inequalities in life and healthy life expectancy.”
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At present, the briefing note stated, state pension age rises have been predicated on the notion that at retirement, people can expect to spend a “third of their adult life in receipt of the state pension”.
However, the PPI has said this proportion actually depends on where in the cycle of rising the state pension age a person falls.
The organisation has said around 50 percent of those reaching state pension age are expected to live for another third of their adult life in retirement.
This is in line with the government’s aims, and the average probability of reaching state pension age has improved by two percent over the last 70 years for people approaching state pension age.
This means more people are benefitting from the state pension sum to help in their retirement.
However, the briefing note also acknowledged that a large proportion of Britons were very reliant upon the state pension.
The report stated approximately half of pensioners sourced 64 percent of their retirement income from the state pension and other benefits.
This illustrates the importance of the payment from the government.
Of course, state pension entitlement is built up through a person’s National Insurance contributions which are usually put forward throughout an individual’s working lifetime.
The full new state pension currently stands at £175.20 per week for those who are entitled to the sum.
For people who are interested in finding out how much they could receive when they reach the eligible age, a state pension forecast is likely to be the perfect solution.
This outlines how much a person is set to receive, when, and whether they could potentially increase the sum.
However, the government website has stated: “You may get less than the new full State Pension if you were contracted out before 6 April 2016.”
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