Imagine working hard all of your life, reaching 66 and finally getting your State Pension, only to discover that you are missing out on hundreds of pounds a year.
Not every pensioner receives the full State Pension. In 2025/26, the average new State Pension payment was £216.46 when the full State Pension was £230.25. That’s almost £700 a year gone. And for women, the gap is even bigger, over £800! And research by Royal London shows that only half of the recipients of the new State Pension are paid the full amount.
Why are so many people missing out? And how can you make sure you get every pound of the State Pension? In this video, we’ll explore what the State Pension is, why some people are missing out on the full State Pension, what you can do about it, and how we helped one of our clients navigate this surprisingly complicated area.
Also, although your State Pension may play an important role in your retirement plans, do you know whether it will be enough for you to live comfortably in your golden years? Our useful Retirement Spending Tool might go some way to answer the question; the link to which can be found in the video description box.
Hello and welcome to the latest Insightful Planning with Astute video. I’m Elliot Unsworth, Head of Client Proposition at Astute Private Wealth, here to talk about the State Pension.
The DWP’s statistics released last August highlighted that the average weekly payment for the new State Pension was £13.79 below the actual State Benefit amount. For women, the picture was even worse, with the average woman receiving £15.74 less every week, a problem which persists every week for the rest of their life. Now this could be down to many reasons, from being contracted out of the State Pension for a number of years, to retiring early. If you’re watching this video, you may be wondering whether you will receive the full State Pension.
Before we get into the details, if you already have the benefit of working with Astute and have questions after watching this, please don’t hesitate to get in touch with your Financial Planner. If you’re new to us, we’ve left a link below this video to help guide you to the right place.
What is the State Pension?
The State Pension is a regular income paid by the government once you reach State Pension age, which has been 66, but is set to rise over time.
To qualify for any of the flat-rate State Pension at all, you need at least 10 qualifying years of National Insurance contributions, and to get the full State Pension, you need 35 qualifying years. In this tax year, the full State Pension is £241.30 per week: that’s just over £12,547 a year. A great benefit that applies to the State Pension is the triple lock – this is a promise that the State Pension will increase each year by the greater of inflation, average earnings, or 2.5%. Given we’ve had high inflation, and then high earnings in recent years, this has really boosted the State Pension.
But working for 35 years doesn’t always mean you’ll get the full amount.
Why are people missing out?
You might have looked at your State Pension forecast online and seen something like: “You’ll be entitled to £241.30 per week if you continue to pay contributions until…” whatever your State Pension age is. Here’s the catch: that forecast includes an assumption that you’ll carry on paying National Insurance every year between now and your State Pension age. It’s not just telling you what State Pension entitlement you’ve earned so far; it’s showing a future projection. So, if you stop working or reduce your income, that forecast might not be accurate anymore.
And here’s another common surprise: even if you’ve worked for 35 years or more, you still might not be entitled to the full State Pension. Why? Because of something called contracting out. Between 1978 and 2016, many people were part of workplace pension schemes that were “contracted out” of part of the State Pension. In exchange, both you and your employer paid lower National Insurance contributions, and you built up rights in your workplace or private scheme instead.
The downside was that you didn’t earn that portion of the State Pension during those years. So, even with a long work history, your State Pension might be reduced to reflect that. This shows up on your record as a “Contracted-Out Pension Equivalent” or COPE figure. It’s not a penalty; it just reflects the fact that a different scheme is providing part of your pension.
This is particularly important because often we discuss this topic with clients who are sure they have built up the full entitlement because they have been working for so long, but they haven’t. The “contracting out” can particularly be overlooked when it was done through a Defined Benefit pension, such as the Teachers’ or NHS schemes. What you can end up with is, for example, having worked for 35 years but only having 28 qualifying years towards your State Pension entitlement because you’ve been contracted out previously.
Now, what actually counts as a qualifying year? You don’t always need to be paying full National Insurance to earn one.
For example, if you earn between the Lower Earnings Limit and the Primary Threshold, so currently between around £6,700 and £12,600 a year, you’re treated as if you’ve paid National Insurance, even though no money is taken. These are called implied contributions, and they still count.
Also, claiming Child Benefit for a child under 12 gives you National Insurance credits. This is one of the reasons it’s important for the lower-earning parent to make sure they claim Child Benefit. Furthermore, if you haven’t claimed Child Benefit because your partner earns over the threshold beyond which you have to pay it all back, then applying for and receiving Child Benefit is still hugely valuable because you will get those National Insurance credits, which could be worth thousands in future pension income.
You can also get credits if you’re a carer, unemployed and claiming certain benefits, or receiving Universal Credit. So it’s always worth checking your record.
How can you check?
The good news is that you can check online to find out how many qualifying years of State Pension you have, and therefore what your State Pension is forecast to be. You can type this URL into your computer [https://www.gov.uk/check-state-pension] or search for “State Pension Forecast”. It’ll likely be one of the top links you find, and you can check it’s the same as the one on screen.
You’ll need a form of photo ID and your Government Gateway ID, which you can create if you don’t have one yet. This should be the most rigorous part of the process!
As a side note, we mentioned earlier that the State Pension age is set to rise. You’ll notice a warning on the website that “The State Pension age is regularly reviewed, so the results of this tool may change in the future”. Typically the government provide 10 years’ notice of an increase to the State Pension age, but this isn’t guaranteed.
What can you do?
If, after all this, you are approaching State Pension age and you are not on track to have a full record and, therefore, the full entitlement, you can pay to top up your State Pension. It’s possible to make Class 3 “voluntary” National Insurance contributions, either as a lump sum or by Direct Debit, to plug historic gaps in your record for the past 6 years. This is particularly common where an individual has retired at, say, age 60 and is due their State Pension at 67. If they have an incomplete record, they can make voluntary contributions between age 60 and 67. Care should be taken, however, because contributions made this way in the tax year in which your State Pension becomes payable will not count towards your record.
Class 3 contributions currently cost £18.40 per week, but each tax year’s rate is different; typically becoming less expensive the further back you go. This means that a full year costs a little over £956 but, once your State Pension comes into payment, will provide you with additional income of £358.50 per year, which means that you get your money back in year 4 after first becoming entitled to our State Pension.
For our clients, John and Jane, simply paying attention to their State Pension entitlements transformed the way they were able to live in retirement. When we started working with John, he was adamant that he had been working for 40 years, and that, therefore, his entitlement was full. It was only upon closer inspection that John was subject to a COPE that would see his State Pension fall short of his expectations by £150 per month. By spending a little over £4,500, John increased his income by £1,800 per year for the rest of his life.
Jane’s position was even more problematic; she had worked on and off throughout her life, and although she did not expect to get anywhere near a full State Pension, she had assumed she would be entitled to around £3,000 per year. On closer inspection, Jane had only accrued a 9-year National Insurance record and was therefore entitled to nothing. By paying a mere £956 on our advice, Jane secured an annual, lifetime income of over £3,500 per year; a staggering return of 375% on her payment!
Further State Pension quirks to consider
What happens when you actually reach State Pension age? Well, firstly, it doesn’t come into payment automatically, and you do need to make sure you apply for it. Secondly, you don’t have to claim it straight away. You can defer, and in return, you’ll receive a higher pension later. For every 9 weeks you defer, your State Pension increases by about 1%, or around 5.8% per year.
But, and this is important, deferring doesn’t always pay off. If you’re in poor health, or have a reduced life expectancy, you might be better off taking it straight away. And then it’s always important to keep in mind, “When will I enjoy this money the most?” Does it make sense to give up income now in your 60s so that you can have more income later, in your 80s and 90s?
Once you start claiming, you can’t change your mind. It’s a personal decision, and it’s worth getting advice.
Finally, under the current State Pension system, introduced in 2016, there’s no automatic way to inherit your spouse’s full State Pension if they die. Everyone builds up their own record. However, in certain cases, especially if your spouse reached State Pension age before April 2016, or if you’re widowed and they had a protected amount, you might inherit some extra pension or lump sum. Also, for people divorced or going through divorce, State Pension rights can be a factor in financial settlements. So again, this is something worth exploring with a Planner.
Summary
The State Pension is the cornerstone of retirement income, a payment that you can rely on for the rest of your life, but don’t assume that you’ll get the full amount. Make sure to check your record online, understand if you have any gaps in your contributions, and look into whether you need to fill them. Speak to your Financial Planner if anything doesn’t look right. Don’t forget, you can click on the link in the description box to download our Retirement Spending Tool. Missing out could mean losing hundreds of pounds every year, for the rest of your life.
Thanks for watching, and see you next time.
