Martin Lewis has named the one situation where contributing to a pension may not be worth it. On his BBC podcast, a listener asked about whether it was worth starting a pension at the age of 48. They had always worked as a freelancer, and had never contributed to a private pension. However, they had consistently paid their National Insurance, helping to build their state pension entitlement. You generally require 35 years of National Insurance contributions to receive the full new state pension, which presently pays £241.30 a week. In his answer, Mr Lewis said there was one exception to his rule of always contributing to a pension.
He said: “The only caveat when it can’t be worth it, is those who are very close to retirement, who are only putting a small amount in, who wouldn’t be entitled to the full state pension, and would therefore be entitled to the state pension top up called Pension Credit, if they didn’t have other income. That can only be the time where mathematically, financially it isn’t worth putting money into a pension for you.”
Pension Credit is designed to assist those of state pension age on a lower income, by boosting weekly finances. It can provide more than £100 a week in additional support. The benefit raises your income to £238 a week for single claimants, or to £363.25 a week for those living with a partner, WalesOnline reports. Even if their earnings exceed these thresholds, an extra £86.05 a week is available to those with a severe disability who receive certain benefits, such as Attendance Allowance. There is also the chance to claim a further £48.15 a week if you care for another adult, as well as other additional amounts for those looking after a child or young person.
To qualify for Pension Credit, you do not need to be receiving your state pension. Claiming the benefit also unlocks access to a wide range of other Government assistance, including council tax reductions, a free TV licence for those aged over 75 and help towards certain NHS expenses.
Applications can be made online via the Government website, or by phoning the claim line on 0800 99 1234. The phone line operates Monday to Friday between 8am and 6pm.
The benefit remains significantly underclaimed, with nearly a million pensioners failing to apply, even after Government campaigns urging people to do so. It is typically worth around £4,300 annually, or considerably more.