Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • homeless9
    • By homeless9 14th Sep 18, 10:00 AM
    • 31Posts
    • 6Thanks
    homeless9
    Understanding my state pension (quick question)
    • #1
    • 14th Sep 18, 10:00 AM
    Understanding my state pension (quick question) 14th Sep 18 at 10:00 AM
    I am in my early thirties. As far as I understand....

    The full state pension payment to those currently in retirement is 164.35 per week or 714.63 per month.

    The state pension rises each year with inflation. If I assume it increases an average of 2.5% each year until my state pension age, then in 34 years time when I get my full state pension I will receive 1,670 per month according to a compound calculator I used.

    All I would like to know is - have I understood this correctly?
Page 1
    • Dazed and confused
    • By Dazed and confused 14th Sep 18, 10:18 AM
    • 3,203 Posts
    • 1,600 Thanks
    Dazed and confused
    • #2
    • 14th Sep 18, 10:18 AM
    • #2
    • 14th Sep 18, 10:18 AM
    The full state pension payment to those currently in retirement is 164.35 per week or 714.63 per month
    It isn't for most people currently in retirement.

    It will be for some people retiring now but not most. As years go by more and more will get 164.35 (or updated equivalent).

    Are you earning enough to get a qualifying year for State Pension purposes? And expect to do so until you reach the 164.35 figure (or updated equivalent)?

    You cannot get State Pension monthly, it's weekly or 4 weekly (and possibly fortnightly?)
    • lisyloo
    • By lisyloo 14th Sep 18, 10:28 AM
    • 22,733 Posts
    • 11,307 Thanks
    lisyloo
    • #3
    • 14th Sep 18, 10:28 AM
    • #3
    • 14th Sep 18, 10:28 AM
    My advice is don't worry about state pension (not if you are planning a comfortable retirement).


    Firstly the rules are likely to change. We can only plan on what we know so we have to make assumption about income tax, NI, tax free lump sum etc. but over 30 years there is a high chance they will change.


    Secondly if you are planning a comfortable/early retirement then it will pale into insignificance. I am planning to retire at 55 but my state pension age is 67, so I have to manage 12 years with NONE. Your state pension age will likely be 68+ and may end up being 70+, that's another rason you need to plan without it if you don't want to work until 70.
    • homeless9
    • By homeless9 14th Sep 18, 10:39 AM
    • 31 Posts
    • 6 Thanks
    homeless9
    • #4
    • 14th Sep 18, 10:39 AM
    • #4
    • 14th Sep 18, 10:39 AM
    It isn't for most people currently in retirement.

    It will be for some people retiring now but not most. As years go by more and more will get 164.35 (or updated equivalent).

    Are you earning enough to get a qualifying year for State Pension purposes? And expect to do so until you reach the 164.35 figure (or updated equivalent)?

    You cannot get State Pension monthly, it's weekly or 4 weekly (and possibly fortnightly?)
    Originally posted by Dazed and confused
    Thanks for the reply.

    Ok, that's cool to know. 164.35 per week for people entering pension age recently.

    It seems you don't need to earn that much to get a qualifying year for state pensions. One of the years I only paid 192.42 in National Insurance, but it was enough to qualify me. Yes I am qualifying. I looked at my history and have 13 qualifying years and I have plenty of time to make up the 35 needed. I do have the option to top up a couple of years which would cost me 400 for each one. I don't think it's worth it as I should easily fulfil the 35 years needed for the full state pension. 400 per year seems expensive based on the fact I only needed to pay 192.42 for one of the 13 years I have qualified for.

    Have I understood how the adjustment for inflation works with the compounded total?
    • Paul_Herring
    • By Paul_Herring 14th Sep 18, 10:41 AM
    • 6,456 Posts
    • 3,170 Thanks
    Paul_Herring
    • #5
    • 14th Sep 18, 10:41 AM
    • #5
    • 14th Sep 18, 10:41 AM
    I am in my early thirties. As far as I understand....

    The full state pension payment to those currently in retirement is 164.35 per week or 714.63 per month.

    The state pension rises each year with inflation. If I assume it increases an average of 2.5% each year until my state pension age, then in 34 years time when I get my full state pension I will receive 1,670 per month according to a compound calculator I used.

    All I would like to know is - have I understood this correctly?
    Originally posted by homeless9
    Apart from your expectation that nothing will change with regard to the state pension in the intervening 34 years, yes.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • homeless9
    • By homeless9 14th Sep 18, 10:49 AM
    • 31 Posts
    • 6 Thanks
    homeless9
    • #6
    • 14th Sep 18, 10:49 AM
    • #6
    • 14th Sep 18, 10:49 AM
    My advice is don't worry about state pension (not if you are planning a comfortable retirement).


    Firstly the rules are likely to change. We can only plan on what we know so we have to make assumption about income tax, NI, tax free lump sum etc. but over 30 years there is a high chance they will change.


    Secondly if you are planning a comfortable/early retirement then it will pale into insignificance. I am planning to retire at 55 but my state pension age is 67, so I have to manage 12 years with NONE. Your state pension age will likely be 68+ and may end up being 70+, that's another rason you need to plan without it if you don't want to work until 70.
    Originally posted by lisyloo
    The state pension is just one aspect I am looking at. I just want to know that I have understood the inflation increase correctly and then I can estimate how much I will need on top of this pension to survive. We can only estimate and be sensible with our money and hope we have enough to survive when we reach old age.

    I will likely inherit a large some of money at some point in older age. I will likely buy a property soon and that will increase in price over time - then I will be able to downsize and free up capital. I also plan to put savings away and invest in stocks. Wages should rise over time. I think I estimate I will be ok, there is always the option to adjust as I go.
    • homeless9
    • By homeless9 14th Sep 18, 10:59 AM
    • 31 Posts
    • 6 Thanks
    homeless9
    • #7
    • 14th Sep 18, 10:59 AM
    • #7
    • 14th Sep 18, 10:59 AM
    Apart from your expectation that nothing will change with regard to the state pension in the intervening 34 years, yes.
    Originally posted by Paul_Herring
    Who said that my expectation is that nothing will change?

    I am just calculating an estimation of what my pension could look like. I am not going to faff about working out what it means if my pension age moves 1, 3, 5, or 10 years. I can worry about that later in life and adjust accordingly.

    Cheers for the clarification on the inflation increases.
    • Silvertabby
    • By Silvertabby 14th Sep 18, 12:17 PM
    • 3,438 Posts
    • 5,069 Thanks
    Silvertabby
    • #8
    • 14th Sep 18, 12:17 PM
    • #8
    • 14th Sep 18, 12:17 PM
    The state pension is just one aspect I am looking at. I just want to know that I have understood the inflation increase correctly and then I can estimate how much I will need on top of this pension to survive. We can only estimate and be sensible with our money and hope we have enough to survive when we reach old age.

    I will likely inherit a large some of money at some point in older age. I will likely buy a property soon and that will increase in price over time - then I will be able to downsize and free up capital. I also plan to put savings away and invest in stocks. Wages should rise over time. I think I estimate I will be ok, there is always the option to adjust as I go.
    Originally posted by homeless9

    Don't add inflation to the State pension - unless you are also adding inflation to your expected outgoings.


    In theory, what 164 per week will buy you today will be what 164 plus inflation will buy you when you retire. So, what you need to consider is that if you retired today could you live on 164 per week - and if the answer is no, then you need to take steps to secure the difference between 164 and what you expect you will need.
    Last edited by Silvertabby; 14-09-2018 at 12:19 PM.
    • cobson
    • By cobson 14th Sep 18, 12:20 PM
    • 32 Posts
    • 20 Thanks
    cobson
    • #9
    • 14th Sep 18, 12:20 PM
    • #9
    • 14th Sep 18, 12:20 PM
    Just a suggestion, but rather than trying to calculate the future value of money in nominal terms, you are probably better off in calculating it in today's terms, as the values then have a more understandable meaning. So if a pension of 164 increases with inflation, it always maintains a value of 164 in today's terms. On the other hand if you put 100 into a 0% interest account and wait 34 years, even though its nominal value is still 100 it's value in today's terms is about 42 assuming 2.5% inflation.
    • homeless9
    • By homeless9 14th Sep 18, 1:13 PM
    • 31 Posts
    • 6 Thanks
    homeless9
    Don't add inflation to the State pension - unless you are also adding inflation to your expected outgoings.


    In theory, what 164 per week will buy you today will be what 164 plus inflation will buy you when you retire. So, what you need to consider is that if you retired today could you live on 164 per week - and if the answer is no, then you need to take steps to secure the difference between 164 and what you expect you will need.
    Originally posted by Silvertabby
    Yep, this is how I am looking at it. I'm just checking I understand how it works and that I will be getting a significant increase in pension amount compared to today, as obviously things in 34 years time will be more expensive.....

    I am expecting to be mortgage free by retirement age. So lets say I had retired today, mortgage free. If I was to receive 164.35 a week, which is 715.63 a month, then that would be plenty right now. I calculated that my outgoings would be around 800 per month if I was to take out a mortgage now. Without the mortgage that would reduce to 400 - 500 per month in outgoings, so yes - 715.63 seems like enough pension to get by, especially as I should inherit a decent sum of money, will also save and invest, wages will increase, and as I plan to buy a house I will also have the opportunity to move to a cheaper property to free up capital, if needs be.

    I am not someone who lives pay check to pay check, buys brand new cars, etc etc..... so I am sensible with money too.

    I don't think I need to worry about a private pension then.

    But feel free to disagree with anything I have said above, any advice is welcome.
    • lisyloo
    • By lisyloo 14th Sep 18, 1:19 PM
    • 22,733 Posts
    • 11,307 Thanks
    lisyloo
    Without the mortgage that would reduce to 400 - 500 per month in outgoings
    This is very low.
    Where do you live at the moment? With mum & dad? with a partner in rented accomodation?


    especially as I should inherit a decent sum of money
    There is no guarantee of this.
    What if your parent (presumably) goes into a care home and it's all spent.
    Marries a toyboy/girl.
    Falls out with you.
    Goes a bit crazy and leaves it to the cats home.


    I will also have the opportunity to move to a cheaper property to free up capital, if needs be
    Are you sure?
    What if you are married to someone younger? have kids? get divorced?


    I am sensible with money too.
    I'd say 400-500 is unrealistic.
    You might get better help if you post up your outgoings.



    I don't think I need to worry about a private pension then.
    I think you need a private pension.
    What if you get married and then have to give your house to your wife with small children (quite ofen when assets are split the woman gets the house as generally she looks after the kids).
    50% of marriages end in divorce so this is in no way an extreme scenario.
    • Ganga
    • By Ganga 14th Sep 18, 2:04 PM
    • 1,358 Posts
    • 714 Thanks
    Ganga
    Yep, this is how I am looking at it. I'm just checking I understand how it works and that I will be getting a significant increase in pension amount compared to today, as obviously things in 34 years time will be more expensive.....

    I am expecting to be mortgage free by retirement age. So lets say I had retired today, mortgage free. If I was to receive 164.35 a week, which is 715.63 a month, then that would be plenty right now. I calculated that my outgoings would be around 800 per month if I was to take out a mortgage now. Without the mortgage that would reduce to 400 - 500 per month in outgoings, so yes - 715.63 seems like enough pension to get by, especially as I should inherit a decent sum of money, will also save and invest, wages will increase, and as I plan to buy a house I will also have the opportunity to move to a cheaper property to free up capital, if needs be.

    I am not someone who lives pay check to pay check, buys brand new cars, etc etc..... so I am sensible with money too.

    I don't think I need to worry about a private pension then.

    But feel free to disagree with anything I have said above, any advice is welcome.
    Originally posted by homeless9
    A lot of what you have been posting on here made sense till you posted the bit highlited above.
    What happens if a future goverment phases out the state pension.
    What happens when the triple lock is cancelled and state pension does not rise as fast as assume.
    Star a private pension or better still a workplace pension where your employer pays in ( free money )
    ITS NOT EASY TO GET EVERYTHING WRONG ,I HAVE TO WORK HARD TO DO IT!
    • Paul_Herring
    • By Paul_Herring 14th Sep 18, 2:09 PM
    • 6,456 Posts
    • 3,170 Thanks
    Paul_Herring
    What happens if a future goverment phases out the state pension.
    What happens when the triple lock is cancelled and state pension does not rise as fast as assume.
    Originally posted by Ganga
    Those would appear to fall under the category of

    faff[ing] about
    Originally posted by homeless9
    and aren't worth any consideration.

    Apparently.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • p00hsticks
    • By p00hsticks 14th Sep 18, 2:41 PM
    • 6,485 Posts
    • 7,018 Thanks
    p00hsticks
    I am in my early thirties.
    Originally posted by homeless9
    I will likely inherit a large some of money at some point in older age. I will likely buy a property soon and that will increase in price over time - then I will be able to downsize and free up capital. I also plan to put savings away and invest in stocks. Wages should rise over time. I think I estimate I will be ok, there is always the option to adjust as I go.
    Originally posted by homeless9
    I am expecting to be mortgage free by retirement age. So lets say I had retired today, mortgage free. If I was to receive 164.35 a week, which is 715.63 a month, then that would be plenty right now. I calculated that my outgoings would be around 800 per month if I was to take out a mortgage now. Without the mortgage that would reduce to 400 - 500 per month in outgoings, so yes - 715.63 seems like enough pension to get by, especially as I should inherit a decent sum of money, will also save and invest, wages will increase, and as I plan to buy a house I will also have the opportunity to move to a cheaper property to free up capital, if needs be.

    I don't think I need to worry about a private pension then.

    But feel free to disagree with anything I have said above, any advice is welcome.
    Originally posted by homeless9
    My twopennyworth.....

    I think you are being a bit optimistic to assume that you're going to be able to live comfortably with just the state pension, although you may scrape by. You;d be far better off having some sort of private pension as well.

    You don't say whereabouts in the country you are, but if you are in your thirties and don't yet have a property then you may well be still paying off your mortgage at the point you retire. Also by the time you factor in moving costs, legal fees, stamp duty etc, downsizing doesn't tend to free up an awful lot of money unless you're moving from a mansion to a garrett.

    Don't count on an inheritance. It may turn out in future that much of the money / property will go to pay for the elderly persons care needs, and even if not they may still be alive and well even after you've reached retirement age yourself.

    And you are also assuming that you are going to be able to work all the way up to State Retirement age - don't count on it. Your health may not permit it, you might get made redundant or you might simply get fed up. A personal pension will allow you to plug the gap between when you actually retire and when you reach State Pension age.

    And changes in circumstance such as marriage, divorce, children, ill health or major problems developing on the house you buy (neighbours form hell etc) can eat into savings / prevent saving more.

    If we had to rely just on a single state pension we'd struggle, even though we live quite frugally. 715 sounds a lot but for us it would cover little more than the basics of council tax, gas, electricity, food / household shopping, TV licence, and basic phone / broadband. Then you have the occasional expenses for clothing, travel, presents, the occasional meal out, new cooker / boiler / repairs etc. We certainly wouldn't be able to afford to run a car, go on holiday etc. We'd survive, but it would'nt be a particularly enjoyable experience
    Last edited by p00hsticks; 14-09-2018 at 2:44 PM.
    • VDOT47
    • By VDOT47 14th Sep 18, 3:18 PM
    • 187 Posts
    • 580 Thanks
    VDOT47
    Agree with what has been said above.


    On the other hand if you get married and stay with your spouse, then they will likely be entitled to a state pension too, at least to the same extent as you are (assuming they have paid in for enough qualifying years), so your 715 per week is likely to be more than that.


    That said, I wouldn't like to take my chances that circumstances won't change surrounding the state pension. If you have any spare at the end of each month you'd be sensible to get some sort of private pension too I would suggest.
    Original Mortgage (Feb '17) 269,995
    Current Mortgage (05/11/18) 239,887
    End Date April 2040 Original End Date February 2042
    • LHW99
    • By LHW99 14th Sep 18, 4:20 PM
    • 1,526 Posts
    • 1,412 Thanks
    LHW99
    On the other hand if you get married and stay with your spouse, then they will likely be entitled to a state pension too, at least to the same extent as you are (assuming they have paid in for enough qualifying years), so your 715 per week is likely to be more than that.
    Except that new state pension can't be inherited - so if spouse dies first your back to a single pension amount
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

57Posts Today

2,920Users online

Martin's Twitter