How and why you should check for gaps in your State Pension

Discover how you can identify gaps in your State Pension and understand why it could be practical for retirement planning.

When you’re working towards retirement, it’s often easy to focus solely on building a significant private pension, and you may overlook the benefits of the State Pension as a result.

Some people seem to believe that it won’t even exist by the time they retire – as many as 71% of working-age Brits have this concern, FTAdviser reports.

Despite these concerns about its future, the State Pension remains an invaluable source of pension wealth for many, providing a steady and guaranteed income to cover essential living costs provided you’ve made sufficient National Insurance contributions.

However, maximising your State Pension entitlement requires careful planning and effort on your part.

With that in mind, continue reading to find out why the State Pension is so practical during retirement and how you can check for gaps in your record.

The State Pension provides you with a guaranteed source of income in retirement

The State Pension is essentially a guaranteed sum of money the government pays when you reach State Pension Age and start claiming it, provided you’ve made sufficient National Insurance contributions. In the 2024/25 tax year, this age is 66, set to rise to 67 by 2028.

In 2024/25, the new full State Pension is worth £221.20 each week. While this might not be enough to cover all your retirement expenses, it can form a crucial part of your overall income and act as the bedrock of your pension wealth.

Indeed, you could use your State Pension to cover any regular and essential costs, such as utility bills and food. This then frees up your other sources of pension wealth for more discretionary expenses, such as a dream holiday or long-awaited home renovations.

Perhaps the most significant benefit of the State Pension lies in its reliability. Unlike any investments you hold in your private pension, which can fluctuate with the market, your State Pension is guaranteed, providing a steady income even during periods of market downturn and volatility.

Better yet, the State Pension typically increases each year in line with the “triple lock”. This invaluable mechanism ensures that what you receive from the State Pension rises at the start of a new tax year based on one of three factors (hence “triple”).

The annual increase is determined by the highest of:

• Inflation
• Average wage growth
• 5%

This could give you the peace of mind that the State Pension will keep pace with the cost of living and continue to act as the foundation of your retirement income.

It’s worth checking your National Insurance record to ensure you qualify for the full State Pension

It’s vital to note that, to qualify for the full State Pension, you need to accumulate 35 years of National Insurance contributions (NICs). You need at least 10 years of NICs to be eligible for any State Pension at all.

You typically accrue a year of credit – referred to as a “qualifying year” – when you make NICs from income earned by working. Aside from this, there are other factors that allow you to claim credits, such as caring for a child or receiving certain benefits.

However, even if you’ve worked hard all your life, there’s still a chance you may have gaps in your record as a result of:

• Working abroad and paying taxes in another country
• Taking time off work to raise children
• Being unable to work due to illness or injury.

Failing to plug these gaps in your record could result in a reduced retirement income when you eventually reach State Pension Age. So, it’s worth obtaining a State Pension forecast from the government to identify any missing qualifying years.

If you discover gaps in your record after obtaining the forecast, you can make voluntary contributions to “buy” additional qualifying years. Just remember that you can normally only do this for the previous six years.

Currently, as a result of transitional arrangements to a new system, you can fill missing years from between April 2006 and April 2016. This option is set to close on 5 April 2025.

You may want to defer your State Pension

While you can start claiming the State Pension once you reach the required age, this doesn’t mean you necessarily have to do so.

In fact, you could choose to defer your State Pension instead. In doing so, you could receive higher monthly payments when you eventually decide to claim.

For every nine weeks you defer, your State Pension increases by the equivalent of 1%. Over the course of 52 weeks, this works out to an increase of just under 5.8%.

Using the 2024/25 figure on Gov.uk of £221.20 a week, you could receive an additional £12.82 each week – the equivalent of around £667 a year – if you defer for an entire year after the State Pension Age.

It’s worth noting that it could take some time to recoup the benefits of deferring if you don’t claim it initially.

According to MoneySavingExpert, it could take around 20 years of receiving your State Pension after this to reach a breakeven point. Even if you defer for three years, you still won’t reach parity of what you would have earned for another two decades after you start claiming your pension.

As a result, there may be circumstances where deferring your State Pension isn’t the most suitable choice for you. For instance, if you’re in poor health, you may prefer to take your State Pension now so you can make the most of it to achieve your goals.

Get in touch

We could provide guidance on the most suitable course of action for you regarding your State Pension and ensure that you’re entitled to as much as possible.

To learn more about how our financial planners can help, email us at advise-me@fosterdenovo.com or call us on 0330 332 7866.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028).

The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken. Past performance is not a reliable indicator of future performance. Pension savings are at risk of being eroded by inflation.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits. Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.

The Financial Conduct Authority does not regulate will writing, estate planning or tax planning.