Understanding the State Pension Maze: Missteps, Myths & What You Should Check Today

In this episode, Mark Morton explores the complex and often misunderstood world of UK state pensions. From the WASPI (Women Against State Pension Inequality) women issue to voluntary contributions, contracting-out, personal tax accounts and looming policy changes, Mark breaks down the key pitfalls people face and why checking your state pension record early matters more than ever.

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Transcript

Hello, it's Mark Morton here, and welcome to the latest in this series of podcasts. Today I thought I'd just talk about state pension entitlement clearly getting closer and closer for me, but obviously with an ING pop ageing population, a big issue. And I think when you look back over my working life, there have been number of. What do you call them? Scandals, I think you could possibly call them scandals. Which lead to people not receiving ultimately what they think you should receive. Waspi Women is one of the ones that continues to get a lot of publicity which was to do with a lot of, I mean, it is a lot of women who were ultimately affected by this where women's state pension age moved from 60 to 65. Now, it's interesting when you look at this, that what, having read behind some of the inquiries, it's a little bit like the post office in some respects. When you, you read it, you sort of read it, you think, really. But it's interesting that the DWP said that at the time, that age move from 60 to 65, they wrote to some women, they didn't write to other women, and they don't actually know who they wrote to. 

Which kind of sums up the whole of the system in many respects and. It is interesting that it rumbles on so, so much now that those women have, as far as I can see, exhausted all legal routes and not come up with any compensation in inverters comm if they have suffered from not buying additional years, et cetera. 

Probably the biggest issue with the Waspi women is that when the Labour party was in opposition, they inferred that they would. Help those women. And having got into power, they are now saying that they won't help that women those women. And part of the reason for it, it depends which, you know, which reports you read and who you listen to. 

But that to compensate those women for potentially lost state pension would cost billions and billions of pounds ultimately. And I think the greater issue it's a bit of a can of worms because if you compensate those women then who else do you compensate? If you look at what I call the Martin Lewis change, which was to do with state pension state pensions for everybody of a certain age and state pension age rising from 65 to then 66, 67, 68 on a graduated basis, depending on your age group the real. 

Issue that relates to that was then Martin Lewis banging the drum and saying, look, you should review your position and you can make potentially voluntary contributions. Now, of course the trouble with that is not everybody can make voluntary contributions. So if you apply that logic to myself it didn't matter whether. 

We were talking about six years, which is broadly the norm for making voluntary contributions or the extended window that was brought in to do with that rise from 65 to 68, but also the fact that number of years of contribution to get a full pension went up from 30 to 35. You know it, for some people there is just no ability to make voluntary contributions. 

There may be some people who've made voluntary contributions are not gonna get back what they thought. You know, voluntary contributions were all well and good if you understand the game. And the game is don't die before state retirement age. So I think what you really see from these changes and the difficulties that arise from those is actually. 

People do not understand the state pension game. You know, I, it was interesting many years ago I met a gentleman called Jim Muell and Jim Muell was his national insurance expert, and he taught me a lot of things about national insurance. State pension, et cetera. So over the years, I've checked my record for both myself and my wife. 

And I think when you fast forward to where we are today, it has never been as easy to check your state pension. You just have to look at your personal tax account. Now, of course, the first issue is the vast majority of people in the UK wouldn't know they've got a personal tax account, let alone what to look at, let alone then what that information was telling them. 

If you look at other instances of issues with state pension, home responsibilities protection, there is an ongoing project of the revenue looking at pre 2000 claims, whereby I would suspect primarily women in those days were not obliged when they submitted their child benefit claim to put their NI number on. 

You then look at class two as a simple example. So many self-employed people over the last few years trying to pay class two, one way or the other, and the revenue system just rejecting it. Now have those self-employed people gone and fought a battle to get that year of state pension and pay that money or have they just given up? 

But of course that's a year of their state pension down the Swanee. You look at self-employed people going forward, the vast majority of self-employed people should be getting a free year of NI contribution going forward. But the real question are they. Is anybody checking? As I said, it's never been as easy to check whether what you see is correct or not re correct. 

You know, are they missing years? Are they actually reflecting what your position should be? Is a whole different kettle of fish. So I suspect there'll be a scandal in due course about high income child benefit charge and the interaction with state pension or not. When you look at what's within the personal tax account, it isn't vastly illuminating. 

There is re reference, and I won't bore you with the history of this, but for somebody like me who's mid fifties he said optimistically. The, you look at my state pension record, I was contracted out for many years. Now the fact that I have 35 years of contribution is not directly what affects my state pension. 

When we moved into this system of 35 years, not 30 and so on in 2016, I assume to recall. Then what happened then is there was a comparative of your. Old state pension. So for me, that would've been primarily basic state pension because I had contracted out for many years. You compared that to what you would've got on the new basis, which is essentially one 35th, broadly six quid a week, and your base figure was the higher figure. 

So since that point in time, I have then built on at six quid a week on a 135th basis, my state pension Now. Within my personal tax account, it merely says I have no missing years, which is broadly correct. Hence, I cannot improve my position. Yeah, but what is my position financially, you know, because it's not about years. 

It's a base sugar plus further qualifying years at a flat rate. It's interesting. Mine says I can't improve the position. I have so many qualifying years, and as things stand, I will get the full state pension when I retire at some sole destroying date in the future. Is that saying I could stop work now and pay no further contributions and still get the equivalent of the full state pension in? 

But for me, nine, 10 years time or is it saying if I contribute for the next 10 years, I think the account is getting a little clearer. Certainly the comments relating to contracting out of changed they are a little, I mean, they're not hugely illuminating, but they're a little clearer. Clearer. 

And they do make the point. Not everybody who retires having contracted out is gonna get the full state pension. The problem is it gives you no specific figure that I think that's probably because the pension system doesn't start to generate information directly to do with you until about six months before you retire. 

And I suspect that is part of the problem. So yeah, lots of ongoing issues with state pension. Depends how interested you are in state pension. Ultimately I think the moral of this little podcast, it is complicated. Check your own, check your spouses, check your family members, et cetera, et cetera and try and educate people to, if nothing else, do basic compliance. 

Does it look vaguely, right? It is far better to sort out a problem four years after the event than 40 years after the event anyway. Of course, if you are young, listen to this. You won't give two hoots about the state pension. Some rather cynical people say that it will no longer exist in the future. I think that's probably incorrect. 

I think for young people you will have to die in order to receive it. Ultimately. It may be that living ages. Continue to increase longevity increases. There will be a review of longevity within this parliament. What the current government then does with that is a slightly different question. 

Are they brave enough to put up state pension age again? There has been some talk in the press about means testing state benefit, which is not the deal, is not the deal on which people have contributed, and I would suggest if you weren't already gonna lose the next election. That's just sealed your fate, but it'll be interesting. 

There will be movement. So if you want to hear more of this sort of stuff feel free to come on our spring tax update. It's fantastic. We are now back in venues. So if you fancy a bit of face-to-face, I think the best way of learning for. Is face to face. So hopefully I will see you on a course one way or the other soon. 

Take care everybody and rush off and look at your state pension forecast. Take care. Bye.