People of eight ages must make State Pension check or lose 'thousands'

The key ages to make State Pension checks or miss out on hundreds of thousands of pounds have been revealed amid the Cost of Living crisis, according to money experts.

People of different ages have been urged to make a key State Pension check. The key ages to make State Pension checks or miss out on hundreds of thousands of pounds have been revealed amid the Cost of Living crisis, according to money experts.

And the advice isn't just for state pensioners, either, with pension pots held privately also at the centre of the warning. Royal London has calculated that starting saving when you’re 18 could add an extra £70k to your pot at retirement, compared to starting at 22.

Sir Steve Webb, a former pensions minister and partner at consultancy Lane Clark and Peacock, says state pensioners must act before April 6 next year to become with. This is because April 6 next year is the date when the much more relaxed rules about filling historic gaps your National Insurance record ends.

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Next April

"After that date you can only go back the standard six years, whereas until then you can go back to 2006," Mr Webb said. The former Liberal Democrats Pensions Minister added: “Note that this more relaxed deadline only applies to people on the new state pension, i.e. those who reached pension age since 6th April 2016.

"It’s already too late to fill gaps for those who retired under the old system.” Mr Webb says: “Before paying you should also think about whether you might qualify for NI credits, perhaps as a grandparent looking after your grandchildren for part of the week, or by claiming sickness related benefits if you are unable to work.

Age 18

Royal London’s pensions expert Clare Moffat said: “Pension wealth benefits hugely from the magic of time. The longer money is invested, the more it can grow. So, the best preparation for your long-term future is to start saving as early as you can.

“A head start of just four years could mean you’re £69,112 better off by the time you retire, if you started saving at 18 rather than 22. That’s a massive difference, with a pension pot 15% larger, just by starting to save as soon as you start working.

Age 22

Steven Leigh, associate partner at Aon said: “While it may be hard to find the extra money, saving more into your pension if your company offers matching contributions is like getting free money from your employer. For people wondering whether it is worth it, as our figures show, saving tens of pounds now could mean you end up with tens of thousands more when you come to retire.”

Auto-enrolment contribution levels at a eght per cent total contribution under current rules means £181k for people in their 20s, but if government removes the bands for auto-enrolment contributions, i.e. pension contributions based on full pay, using a max contribution of 16 per cent it would be £260,000.

When you get a pay rise

Brewin Dolphin explains: “Let’s imagine you’re on a salary of £55,000, are a member of an auto-enrolment scheme, and pay 5% of your qualifying earnings into your pension. Each month, you would make a £183.46 pension contribution and receive an estimated take-home pay of £3,302.381.

“If your salary increased to £60,000, your pension contribution would remain at £183.46, whereas your estimated take-home pay would increase to £3,544.04 – that’s an extra £241.66 in your pocket every month. It might be tempting to keep this cash for little luxuries, but putting it in a pension could increase its value by a huge 20-45% because of the tax relief you’ll receive. This could make a big difference to your future.”

Age 37

Many parents pay hefty nursery fees in the early years, which can significantly impact their ability to save for retirement. However, if you are eligible for free-hours from the government, or when your child goes to school, consider using some of that spare cash into retirement.

According to daynurseries.co.uk the average annual cost of full-time nursery is £15,865.72. If your child went to school when you were 37, and you saved just half of this money into your pension pot between that and 67 (the state pension age for those born after April 1960), you’d have bagged an extra £237,985.80.

Age 50

From age 50, you’re entitled to a free Pension Wise appointment. “The trend towards more pensions being accessed without professional advice looks like a massive red flag,” said Stephen Lowe, group communications director at Just Group.

“Retirement decisions are some of the trickiest financial decisions that people will ever face. That’s particularly true for income drawdown where the saver is being asked to shoulder all the longevity and investment risk and is likely to find their income fluctuating over time.”

Age 66

You do not get your State Pension automatically - you have to claim it. You should get a letter no later than 2 months before you reach State Pension age, telling you what to do. If you want to defer, you do not have to do anything. Your pension will automatically be deferred until you claim it.

Mr Webb says: “A lot depends on your individual circumstances. Most people who have stopped working will need their state pension as soon as they can have it. But if, for example, you carry on working past pension age then it may be worth thinking of deferring until you’ve stopped work.”

He said: “For those who don’t expect to live long in retirement, they may unfortunately not get back in enhanced state pension what they gave up by not claiming it on time. For those on benefits, any improvement in state pension for deferring could be clawed back in whole or in part through reduced benefits, so again you may have done better to claim the money on time.”

Age 75

A healthy 75-year-old can secure 20% more income from the best annuity provider compared to the worst. The best-worst gap is 18% at age 70 and 13% at age 65. The income offered could be higher once medical history and lifestyle factors are disclosed.

Stephen Lowe, group communications director at Just Group, commented: “The gap between the best and worst deals has been rising through this year. That is true for all ages we track but is currently particularly high at 20% for buyers aged 75. Annuities provide secure income, giving people peace of mind to spend what they receive without worrying if it will rise, fall or run dry during their lifetime. But there are no second chances when you buy an annuity – you must get it right first time.”