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5 ways to get more secure income in retirement

How you could boost the valuable income you might get from the State Pension, annuities, and defined benefit pensions.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Having a secure income in retirement is incredibly valuable. Knowing you've got money coming in every month to help pay the bills can help give you piece of mind.

The State Pension (assuming you're entitled to it) will cover some of your expenses. But in most cases it won't cover them all. The good news is there are other ways to help boost your secure income. Here are 5 tips to help.

This article and our guides aren't personal advice. If you're not sure what's right for you, get free guidance from Pension Wise or ask for financial advice – there might be a charge though.

Tip 1 – consider topping up your National Insurance contributions

You currently need 35 qualifying years on your National Insurance record to get the full State Pension which has recently increased to £179.60 per week. The number of qualifying years you have will depend on a couple of things.

Firstly, how many years you've been employed or self-employed and paid National Insurance contributions (NICs). And secondly, the number of years you've received National Insurance credits for. If you've worked abroad or had a career gap, you might not hit the full quota.

If you don't think you'll have 35 qualifying years by the time you hit State Pension age, you can often top them up by paying voluntary NICs.

Most people can make voluntary contributions for the past six years. The deadline to do this is 5 April every year. This means you have until 5 April 2022 to make up for any gaps for the 2015-16 tax year. Depending on your circumstances, you'll either buy class 2 NICs (which cost in the current tax year 2021/22 £3.05 a week) or class 3 (£15.40).

Check your National Insurance record online or find out more on the government website.

Tip 2 – delay your State Pension

For every nine weeks you delay taking your State Pension, the government will increase your future income by 1%. It works out as roughly 5.8% for every year. While you're getting an uplift, you're giving up a series of initial payments, so you'd need to live for about another 17 years in order to break even.

If you're working past retirement age and don't need your State Pension straight away, it could make sense to wait. You'll have a higher guaranteed income banked for when you need it.

Tip 3 – consider an annuity later in retirement

An annuity is a type of income you can exchange your pension savings for, which pays you a guaranteed income every year for as long as you live. Once an annuity's purchased you usually can't reverse your decision, so it's important you do your research and get the right one for your circumstances. Annuity rates have stayed low for a few years now. And lots of retirees have abandoned them altogether, in favour of taking flexible payments from their pension.

Even if you ruled out annuities at the start of retirement, it's always worth checking in on what rates are on offer. Rates change and you might end up with a better deal in your later years anyway.

Although not the cheeriest of topics, you could get an enhanced annuity if you develop any health conditions.

For example, a standard single-life level annuity with no guarantee period for a 65-year-old with a £100,000 lump sum is currently £4,979 a year. But for a 75 year old with high blood pressure and high cholesterol, the annual income available using current rates would be £7,115. These are both based on average postcodes and paid monthly in advance.

We generated these quotes using our online annuity quote tool between 1 April and 6 April 2021.

Get an annuity quote to see how much you could receive. Remember quotes are only guaranteed for a limited time and the income you could receive will depend on the amount of money you have in your pension, your circumstances and the options chosen.

Tip 4 – defer your defined benefit pension

Only around one in four employees are lucky enough to have a defined benefit pension – a type of scheme set up through an employer that pays out a calculated guaranteed income for life.

There's been a big shift away from defined benefit (DB) pensions in recent times with lots of employers no longer offering them to new employees. But if you're lucky enough to have one, you might be able to put off taking it until later in retirement. This could be an option if you have other pension pots or another form of income.

The great thing about deferring a DB pension is that you'll often get a guaranteed uplift. This increases your annual income and tax-free cash entitlement as a result. But if you're approaching the lifetime allowance (currently £1,073,100 for most people in tax year 2021/2022), you might want to consider the effect deferring could have on this. You'll need to check if your DB scheme will let you defer, and how much more you might get.

You should also check how your scheme will calculate any increase. For example, if you delay by only six months, will you receive an uplift worth half the annual increase? Or does the increase only kick in if you defer for at least one whole year?

Tip 5 – pay more into your DB scheme

You might be able to accelerate the build-up of your DB scheme pension by buying more years of membership. But you'll need to check any eligibility criteria with your scheme provider and whether they offer this. Also check to make sure any extra income you might get is worth the extra money you'll pay in.

Remember though, you usually need to be at least 55 (57 from 2028) before you can access money in a pension. Pension and tax rules can also change, and benefits depend on your circumstances.

Switch your future on

If you want to try and boost the income you'll get in retirement, it's better to act sooner rather than later.

These guides are packed full of useful tools and tips to help you get a smart pension and retirement plan in place.

How to plan for retirement in your 50s

Taking money from your pension

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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