Why You Should Maximise Your UK Basic State Pension
Maximising the UK State Pension means making sure one has at least 30 years of credits in the scheme. To buy all these voluntarily costs about £10,000 and the benefit is equivalent to £100,000. When do you ever get an investment like that?
The reason why these credits are so cheap to buy is that they´re deliberately made that way. to allow the less well-off to participate. The UK is one of those countries where you can add credits even though you´re not working or not in the country. In fact you can even add credits after you have retired, by buying Class III contributions.
If you´re wondering where I get the £100,000 valuation from, it´s the money you would need to buy an annuity equivalent to the Basic State Pension [2012]. None of know what the Basic State Pension will be when we get to retirement age, but it´s a fair bet that some of it will still be in place, so I have assumed that we would get £4,000 p.a. index linked.
There are quite a number of people we advise whose spouses are not in work and are unlikely to have 30 years credit by the time they retire. Since one can pick up credits only from the last six years, it´s often worthwhile getting on with it. It might be the single most effective piece of wealth management advice we can give - and might make you wonder if you can get to be a millionaire simply by picking up State Pensions from three or more countries (more of that later). Very often people who have moved to Australia and the USA and Canada forget that they can quite easily get two State Pensions, one from the country they are in and one from the UK. For those people, it´s almost always worthwhile to bring their total credits up to 30 - HMRC even have a special bank account for those people paying from overseas.
© copyright 2011-2012 Fee-Only Planning Ltd. Best Money Decisions, all rights reserved. Excerpts may be quoted with full acknowledgement by prior agreement. This Money Tip is not advice you can rely upon alone for making decisions: always seek professional advice. This is not an incentive to buy or sell any security. This type of research information is only available for those who have passed the Competent Investor Quiz at the end of our book.