Maximising state pension benefits.
A key part of financial planning often overlooked is making sure that you receive the maximum state pension in retirement. To get a state pension forecast simply use the tool on the website https://www.gov.uk/check-state-pension.
If there is a shortfall, there are 2 options:
- If there are likely to be tax years in the future where the client will not achieve a qualifying year because of insufficient earnings or Credits, then in those years, it is possible to pay Voluntary or Class 3 NICs.
- If there are historic gaps in a client's NI record, it may be possible to pay Voluntary or Class 3 NICs as a one-off lump sum to make up any shortfall.
A key question however is are Class 3 NICs Good "Value for Money"? The short answer is; "probably, yes"! A payment of £14.10 per week will secure, in today's terms an indexed linked pension of £4.44 per week. However, it is important to consider some of the (potential) drawbacks with the StSP, the main ones are:
- The pension ceases on the individual's death (no spouses pension)
- If they retire abroad, residents of many jurisdictions do not receive any indexation of their State Pension.
- Whilst indexation applies with residents of EU Member States, will that still be the case post-Brexit?