This is surprisingly very easy to do and is now available online. You can check when you are entitled to claim your state pension, how much you can expect to receive, what your National Insurance (NI) record is and if you have any gaps in your record which you may want to fill.
Obtaining a state pension forecast could be more relevant to you if you reach state pension age after 6 April 2016. This is because the new State Pension (based on a single flat-rate amount) replaced the old basic State Pension and Additional State Pension system.
You will need to confirm some details about your identity when you log in so HMRC recognise that you are who you say you are. If you have a Government Gateway account, you can log in using the same details.
If you aren’t registered, then you will need to set up a new account but this can be done very quickly and easily as long as you have your NI number, a recent payslip, your passport or P60 to hand.
Once you create your account and you are logged in then you will see a summary of the following:
The date which you are entitled to receive your state pension
Your state pension age
The forecast of your state pension shows as a weekly, monthly and yearly amount.
It’s important to note that this is a forecast and is not guaranteed, but it gives you an immediate estimate and will allow you to see if this will be enough income for you to live on in retirement. If you have private or workplace pension schemes then this will be paid on top of those and will allow you to review any gaps that you may have.
You will see a breakdown of your NI record up to 6 April 2016 expressed as a weekly payment. This is what HMRC call your Starting Amount for calculation under the new State Pension system. It compares the amount of State Pension you would receive under the old basic State Pension rules to the new ones based on your NI record in the old system.
To receive the maximum payment currently set at £155.65 per week, you need to have full NI record of 35 qualifying years. You can view your NI record, a summary of the number of years of full NI contributions you have made and how many years you have left (until your state pension age) to make contributions. It also breaks down each tax year and if this is a full year (or not).
The final section states whether you have been contracted out of any part of the state pension in the past. If you were a member of a workplace pension or a personal pension scheme which was contracted out, both you and your employer both paid lower NI contributions. In some instances, some of your NI contributions were paid into your private personal pension scheme instead.
Your pension schemes will include an amount of pension which will be paid to you as a replacement to the state pension so you haven’t missed out; instead it’s been accumulated in a different way. It isn’t paid by the Government either but they estimate what this figure will be and is instead paid by the pension scheme provider. The actual amount will depend upon the scheme and your pension accrual together with any investment choices. Contracting out is no longer allowed and all employees now pay the same rate of NI from 6 April 2016.
Having been contracting out means that you gave up some State Pension so your Starting Amount for the new State Pension may be lower than someone with similar circumstances who hadn’t been contracted out.
Once you’ve reviewed your state pension forecast, it would be wise to review any other pension schemes you have in place to establish when you realistically expect to retire and how much you will need. Many people may then need to review their financial circumstances and this is where seeking professional advice could help.
Those who see a financial adviser generally feel that the advice they receive can tangibly benefit them, primarily because the adviser can focus on your specific retirement objectives, taking into account your individual personal circumstances, including your tax position.
Seeking professional financial advice can offer many the peace of mind that their finances are efficient and that their financial goals are on track, so if you feel that you could benefit from advice you should contact a regulated financial adviser.
Armstrong Watson Financial Planning is an independent financial adviser, authorised to provide regulated pension advice. We have advisers across our office locations, so contact us to arrange an appointment to discuss your retirement needs at your local office on 0808 144 5575 or email: help@armstrongwatson.co.uk.
