This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
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Pension and tax rules can change, and benefits depend on personal circumstances.
Full podcast episode transcript
[0:11] Sarah Coles: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I’m Sarah Coles – I’m Head of Personal Finance here.
[0:16] Helen Morrissey: And I’m Helen Morrissey – Head of Retirement Analysis.
[0:19] Sarah Coles: Head of Retirement Analysis and completely obsessed with pensions – so it’s absolutely your birthday today! – ...
[0:24] Helen Morrissey: [Laughs]
[0:24] Sarah Coles: ...’cause we’re gonna get stuck into something that I know is very close to your heart – and that’s the State Pension.
So, we’re gonna take a look at why now is a really important time of year for the State Pension – and we’re also gonna put a few often-asked questions to you as well, so I hope you’ve been swatting up!
[0:37] Helen Morrissey: Absolutely – no, great stuff – this sings to me, basically, Sarah! So, you are right – this time of year, it is really important time for all things State-Pension – and the reason for that is that we start to gather a lot of the key data that is used towards the triple lock, which is used to operate the State Pension every year.
[0:56] Sarah Coles: Now, I know, obviously, for you, triple lock is like... you know, for other people, say, the word ‘Breakfast’ – but can you just explain a little bit about what it really means?
[1:03] Helen Morrissey: Yeah – so the triple lock is the mechanism that is used to increase the State Pension by every year – and, basically, what it aims to do is to increase the State Pension by whichever is the highest of 2.5%, CPI inflation, and average wages. So, theoretically, whichever is the highest number of those is what is used to increase the State Pension by.
[1:27] Sarah Coles: One of the interesting things about the triple lock, then... it does mean that it will always keep pace with inflation – and it’ll keep pace with wage inflation – and then, if those times are really low inflation, presumably, it grows faster than inflation – so it kinda makes the State Pension more valuable as you go along.
[1:40] Helen Morrissey: It absolutely is. It was, initially, introduced in a bid to help combat pensioner poverty because we had seen some instances where the State Pension increase was quite small. So, under the triple lock, we’ve seen those State Pension increases increase quite a lot to help boost that State Pension.
[1:58] Sarah Coles: And we’ve got away from those days, when you had like a 2p rise in the State Pension, ...
[2:01] Helen Morrissey: Exactly.
[2:01] Sarah Coles: ...or whatever it was.
So, you talked about the things that it’s pinned to, but those things are on specific dates, aren’t they? Some of those have already come out, haven’t they?
[2:08] Helen Morrissey: Yeah – so, as you say, two out of the three parts of the puzzle are already in place – and the final one will be out very soon. So, obviously, we’ve got 2.5% – which is set in stone – but, when we look at inflation and average wages, the average-wages figure used is that for between May and July. Now, that was published last month, in September. The inflation figure that’s used for the triple lock is the one for September, but it is published later on this month, in October.
So, I’m sorry – that’s all a little bit...
[2:47] Sarah Coles: [Laughs]
[2:47] Helen Morrissey: ...complicated – you have to get your head around it – but, as I say, so far, we’ve got two out of the three bits of the puzzle.
[2:53] Sarah Coles: So, I guess, there is always the chance we get this massive and unexpected hike in inflation that surprises us all and then leaves it – but it looks a lot like it might be that wage increase.
[3:01] Helen Morrissey: Absolutely. So, we add that average-wage data that was published last month, and that put average wages – including bonuses – increasing by 4.7%.
Now, given that inflation, right now – it’s currently at 3.8% – so, unless something crazy happens with inflation – and we see it really soar – the likelihood is that that wages figure – that 4.7% – will be the figure used for the triple lock. So, that means that somebody with a full new State Pension would see their payment increase from its current level – which is £230.25 to something just over £241 per week – if that 4.7% increase comes into play.
[3:52] Sarah Coles: So, what about someone who’s on the basic State Pension.
[3:54] Helen Morrissey: Yeah – so someone on a full basic State Pension – so that’s retirees, pre-April 2016... they would see the increase on that part of their pension increase from £176.45 to... I think it’s £184.75 per week under the triple lock.
[4:16] Sarah Coles: That’s very specific. So, ...
[4:17] Helen Morrissey: Yes.
[4:17] Sarah Coles: ...I mean, obviously, we know, with pensions, the devil is always in the detail – so we talk about the pensions being liked to the triple lock – but it’s not every single bit of those pensions that’s linked, is it?
[4:25] Helen Morrissey: Yeah – that’s a really important point that you make there, Sarah.
So, you know, under the full new State Pension – that increases in line with the triple lock – but, when we look at basic State Pension, you’ve got the core basic State Pension payment – that does increase in line with the triple lock – but you have various other add-ons. So, I’m talking like the State Second Pension – often known as the Additional State Pension as well. Those kind of add-ons... they actually increase by CPI inflation every year, rather than by the triple lock – so there can be some difference in how they are increased because of that.
[5:03] Sarah Coles: And so, those bits of pension – they were linked to the old system, rather than this new flat-rate State Pension?
[5:07] Helen Morrisey: Yeah, yeah – so increase by CIP inflation – yes.
[5:11] Sarah Coles: Obviously, we talk about how much people get, but the other big unknown for a lot of people – or the thing that’s always up for debate – is what age you are when you get the State Pension.
[5:19] Helen Morrisey: Yeah, absolutely – and we are soon to see some change in that as well.
So, State Pension age is currently 66 – but, as of next year, it’s gonna be on its way up to 67. It’s done incrementally – so, over the 2026-2028 period, it will make its way up slowly to age 67. Then, under the current timetable, we are due to see it start making its way up to age 68 in the mid-2040s.
In addition to that, there is currently a State Pension age review ongoing. Now, that’s gonna take some time to report back, but what they’re gonna be looking at is, ‘Is the State Pension age... is it set appropriately?’ – ‘Does the timetable need to change?’ So, there’s potential there to see some of these State Pension ages potentially accelerated – or the timetable for age 69 – potentially, 70 – put in place... that could happen as part of that.
You’ve talked about how you get your State Pension. It’s really important to say that you don’t get it automatically – it’s not like you’ve hit your magic State Pension age and you start to receive it – you actually have to claim it.
[6:33] Sarah Coles: If anyone’s affected by these rises in the state pension age, one of the things that’s worth knowing is that doesn’t just happen overnight, does it? They don’t just go, ‘Oh, no, we’re done with 66 – now we’re going to 67.’ It’s a complicated process, by which it gradually gets increased – so it’s worth looking on the government website – isn’t it? – just to see, if you’re affected, how that exactly affects you.
[6:49] Helen Morrissey: Absolutely – that’s a really good point. So, on the gov.uk website, you can input your date of birth, and it will tell you what your State Pension age is.
So, as you say, it increases, but it increases gradually. The whole process going up to 67 is gonna take around two years, so go to that gov.uk website – make use of that tool and find out when your State Pension age is currently tagged to be.
[7:14] Sarah Coles: So, I know you’re really careful with how you use your language when you’re talking about pensions – because everything is always complicated! And...
[7:20] Helen Morrissey: Ssss...
[7:21] Sarah Coles: ...one of the things you’ve talked about here is the full State Pension. So, can you tell me a little bit why you put the word ‘Full’ in there?
[7:28] Helen Morrissey: It’s really important. So, your State Pension – how much you get – it’s based on your National Insurance contribution record – and what tends to happen is that, to receive any State Pension at all, you tend to need... it’s 10-years’ worth National Insurance contributions.
Now, to receive the full amount, you’ll generally need 35-years’ worth of National Insurance contributions – and you can go online... again, on the good old gov.uk website to check your National Insurance record – and to get a State Pension forecast – to see what you’re in line for – because you might find, the way it’s currently structured, that you’re not on track for a full new State Pension – so you need to double-check it.
[8:12] Sarah Coles: So, if someone goes to the website and discovers they’ve got, maybe, gaps – and they’re not on track for this 35 – is there anything they can do about it?
[8:17] Helen Morrissey: Yeah – so people do get gaps in their National Insurance record, but for various reasons.
So, it could be time spent out the workforce – you could be abroad, for instance – or you could be out of the workplace – that could be being unemployed, caring for children, loved ones – and not claiming relevant benefits. So, if you are in that position, you might find that there’s gaps in your National Insurance record that mean that you’re currently on track to get less than the full State Pension.
[8:48] Sarah Coles: And so, if people can’t close their gaps this way – they can’t just, retrospectively, make up for these gaps – they can, actually, pay to close gaps, can’t they?
[8:56] Helen Morrissey: So, there’s a few different things that you can do here.
So, first things first is to check that your National Insurance record is up-to-date – and that there are no errors. Also, check to see if, during one of these gaps, you qualify for a benefit that comes with a National Insurance credit.
Sometimes, credits are added automatically – but, sometimes, you do need to claim it. So, examples can include the likes of Employment and Support Allowance, Child Benefit, or Job Seeker’s Allowance. If this is the case, you can see if you can backdate a claim and get the credits added to your record.
Over recent years, we’ve seen Child Benefit applications decrease – and one of the reasons for that was the introduction of the High Income Child Benefit charge – that’s a bit of a mouthful! And what that did was that... you would receive your Child Benefit – but, if one of the partners was earning more than £60,000 a year, you would start to get that Child Benefit clawed back, effectively. So, by the time you hit earnings of £80,000 per year, the tax charge involved would be equivalent to the Child Benefit that you’d received, so you’d just have to pay it back in Self-Assessment.
So, you can imagine that a lot of people thought, ‘Well, what’s the point of receiving the Child Benefit if I’m only paying it back?’ So, they opted out of Child Benefit – but what they didn’t realise was that, by opting out of Child Benefit, they weren’t getting that National Insurance credit as well.
So, luckily, the Government has recognised this – and there is a form that you can check to say, ‘I don’t want the Child Benefit, but I do want the National Insurance credit.’ So, it’s really important to check for things like that.
The other quick thing to check as well is, sometimes, the working partner claim the Child Benefit in their name – just ‘cause it might have seemed like an easier thing to do – but, by doing that, they didn’t realise that the non-working partner – who was looking after the child – was missing out on that National Insurance credit. So, there is potential that you can transfer those credits across to the non-working partner – so it’s something that’s well worth digging into and seeing if you can plug the gaps that way.
[11:08] Sarah Coles: So, assuming that you can’t plug the gaps through these cunning solutions, you can actually pay to close gaps, can’t you?
[11:13] Helen Morrissey: Yeah, you can. So, you can generally fill gaps, going back six tax years – and the cost of plugging these gaps... it depends on what year it is you’re trying to fill. So, again, on the gov.uk website, it will tell you how much those costs are. But, if you were to pay to fill a gap for the 2024-2025 tax year, for instance... that’s gonna cost you about £900. If you’re plugging partial years – sometimes, it’s a partial year you have... that will cost less – so it might make sense to plug those gaps first.
For each year you plug, you’re gonna get an extra one-thirty-fifth into your State Pension – so that works out, right now, around £300 – so it’s actually pretty good value – it’s worth taking a look at.
[11:56] Sarah Coles: Details of all of those sort of gaps – and how much they cost – and how long those gaps are... that’s all on that famous gov.uk website.
I guess, one of the important things is that, even if you found the gaps – even if it’s not that much to plug it – there is an extra step you need to take between the two things, isn’t there?
[12:11] Helen Morrissey: Yeah – so what I would say is... before you hand over any money to plug these gaps, you need to check with the Future Pension Centre that you genuinely are going to benefit from it – because there are some instances where you could pay over that money, and it doesn’t necessarily boost your State Pension, so you just have to go through the rigmarole of claiming it back.
So, one really important one is... if you were contracted out – and this is something that comes up a lot. A lot of people say, ‘Why are they getting less State Pension than I thought?’ – and it’s usually ‘cause they were contracted out – and that is a hangover from the old basic State Pension system – where you could, effectively opt out of the Additional State Pension – also known as the State Second Pension – in return for paying lower National Insurance.
Now, ‘cause you paid less National Insurance... in some cases, that can impact how much State Pension you can build up – so it is very complicated, but it is well worth checking with the Future Pension Centre to see if you can still boost your pension with those voluntary contributions. Some people may well be able to, but other people won’t – so it’s just well worth checking.
[13:20] Sarah Coles: I would also say, from personal experience, that it’s worth checking it just sooner rather than later. I had a period, in my 20s – when I contracted out – because I didn’t know anything about pensions in my 20s – and someone went, ‘Ooh, you can do this thing – and get some free money.’ And, idiot that I was, I thought, ‘That’s not the best thing to do’ – and I lived in fear of that for such a long time – thinking, ‘I’m just gonna get no State Pension.’ And, actually, when you go to this website – we can’t stop talking about – and have a look at what you’re due to get – and whether you’ve got any gaps. And, once you’ve got it all laid out in front of you... of course, that, then, means you can start make plans for your own pension – and you can think about, ‘Do I need to pay more into my own personal pension or a SIPP – in order to help make sure that my income is what it needs to be in retirement?’
[13:57] Helen Morrissey: You’re absolutely right there, Sarah – the State Pension... it is the backbone of your retirement income. There’s very few people that can afford to do without it. And, as you say, it’s not something that’s worth worrying about. You know, you can go online – you can get a State Pension forecast – and it’ll tell you how you’re fixed – and, if you’ve got those gaps, you can start putting a plan in place to see if it’s worth your while plugging those gaps – or it can give you the confidence to know that you’re doing all you can – and then you can make plans over and above that to really boost your retirement income. So, absolutely – I agree.
[14:32] Sarah Coles: It’s always interesting to talk to you about pensions – and it’s always the case, you always send us away with homework! It’s a little thing you need to look into, but it can make such a huge difference to your peace of mind as well as your retirement...
[14:41] Helen Morrissey: It...
[14:41] Sarah Coles: ...income.
[14:41] Helen Morrissey: ...absolutely does. No – I would agree with that, wholeheartedly.
[14:45] Sarah Coles: But, of course, before anyone runs off and does their homework, it is worth looking at the stat of the week – and you’ve prepared it this time, haven’t you, Helen?
[14:50] Helen Morrissey: I have – so I’m gonna ask you the question, then – ...
[14:53] Sarah Coles: It’s very exciting!
[14:53] Helen Morrissey: ...absolutely!
[14:54] Sarah Coles: [Laughs]
[14:55] Helen Morrissey: We’ve talked a lot about the triple lock over the course of this podcast – so I want you to tell me when you think it was introduced. So, I’m gonna give you some options here.
So, was it the 2011-12 tax year – the 2014-15 tax year – or the 2018-19 tax year?
[15:15] Sarah Coles: This feels like something I should definitely know! I know it came about as a result of the coalition government – it was one of the things that was decided within the coalition government... 2011 springs to mind first, but do these things happen overnight?
I’m gonna say, ‘Yes, they happened overnight – all happened in 2011.’
[15:30] Helen Morrissey: And you would be right, ...
[15:30] Sarah Coles: Ah!
[15:30] Helen Morrissey: ...Sarah – they absolutely did – ...
[15:31] Sarah Coles: [Laughs]
[15:32] Helen Morrissey: ...so massive ‘Well done’ – massive ‘Well done.’
[15:34] Sarah Coles: Oh, I’m gonna take my gold star now – ...
[15:36] Helen Morrissey: [Laughs]
[15:36] Sarah Coles: ...and just wear it all weekend – I’m very proud of myself.
[15:38] Helen Morrissey: Excellent!
[15:39] Sarah Coles: [Laughs] Well, that’s all from us – but, before we go, we should say that this was recorded on 3rd October 2025, and all information was correct at the time of recording.
[15:46] Helen Morrissey: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you.
[15:51] Sarah Coles: So, all that’s left is for us to thank our producer, Elzabeth Hotson – and also to thank you very much for listening. We’ll be back again soon – goodbye!
[15:58] Helen Morrissey: Goodbye!