Expert Gareth Shaw offers advice on building entitlement to the state pension
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The more fortunate pensioners have extra sources of retirement cash such as workplace or personal pensions, but too many have to muddle through on whatever the state pension provides. If you are in that position, try everything you can to generate some extra funds after you retire.
The new state pension is just £179.60 a week, which adds up to £9,339 a year. That’s barely a third of the average full-time national salary, and you only get that if you qualify for the full amount.
Many will get much less, because they have not made the maximum 35 years of National Insurance contributions during their working lifetime.
Women have it hard as they are more likely to have worked part time or in low-paid jobs, often because they had to raise families or care for elderly relatives.
The Waspi generation of women born in the 1950s have waited up to six years longer than anticipated before receiving their pension, losing tens of thousands of pounds worth of income.
A shocking 2.1 million pensioners are now in poverty, up from 1.6 million a few years ago.
Here are five potential ways to bring in some more money.
Claim pension credit. Many struggling pensioners could get an instant income boost by claiming this valuable top up.
Incredibly, a huge £1.6billion of pension credit sits unclaimed each year. Nearly a million households are missing out on an average £1,600 a year money that could make their lives better.
Pension tops up the state pension for low income households to £177.10 for single people and £270.30 for couples.
You can apply by post or online at Gov.uk, or by calling the pension credit claim line on 0800 99 1234. If you would struggle to claim yourself, ask friends or family to help.
Get other state benefits. If you qualify for pension credit, you may also automatically get other benefits as well, especially if have have disability.
Claimants may get an extra £67.30 a week if they qualify for attendance allowance or the middle or highest rate of the disability living allowance care component. Those claiming the daily living component of personal independence payment (PIP) or an armed forces independence payment may also get more. Those claiming carer’s allowance could bag an extra £37.70 a week.
Pension credit claimants may also get housing benefit if they rent, or support for mortgage interest if a homeowner.
They may also qualify for council tax reduction, a free TV licence if 75 over, help with NHS dental treatment, glasses, transport cost for hospital appointments and heating costs.
Pensions campaigner Ros Altmann said benefits are a minefield but try to claim all you can. “Tax-free benefits include the Christmas bonus, winter fuel payments, age addition, free travel and free prescriptions.”
Claim the marriage allowance. Nearly 1.8 million married couples and those in civil partnerships save up to £252 a year in tax by claiming marriage allowance, and HMRC is encouraging more to claim.
Couples are eligible if one partner earns less than the personal allowance of £12,570 and the other is a basic rate taxpayer. Couples can backdate claims for up to four previous tax years, getting a maximum £1,220.
Return to work. Another option to raise more cash is to go back to work, say, on a part-time basis. Andrew Morris, senior equity release adviser at advisers Age Partnership, said this isn’t for everybody. “Many people struggle with their health as they get older, making working on difficult.”
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Put your property to work. If you need some extra income, why not rent out a spare room in your home? The Government even gives people financial incentives to take in a lodger, Morris said. “You can earn £7,500 a year free of tax under the rent-a-room scheme.” If renting, check the terms of your tenancy agreement.
Homeowners have more options to raise money in retirement, Morris said. One option is to downsize. “This could release money from the property and reduce your bills and maintenance costs.”
The downside is that estate agency fees and removals costs into your gains, while many are reluctant to leave the family home.
Homeowners could raise raise tax-free cash by taking out an equity release scheme, Morris said. “You do not have to make any repayments in your lifetime. The debt and interest is cleared from your property sale after you die or go into care. It can change lives but specialist advice is essential.”
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