The State Pension is a regular payment from the Government that most people can claim when they reach the official State Pension age. Not everyone is entitled to the same amount - how much you get depends on your National Insurance record. To be eligible for a State Pension, you will typically need at least ten qualifying years on your National Insurance record.
The basic State Pension increases every year. The amount pension payments increase is determined by the triple lock, which is a commitment from the Government to increase the pension rate by whichever is the highest of the following: a minimum of either 2.5%, the rate of inflation or average earnings growth earnings. The idea behind the triple lock is to retain the value of a State Pension.
The earliest you can get the new State Pension is when you reach State Pension age. The State Pension age in the UK is not fixed and has been slowly increasing over the past few years. We are fitter and healthier than ever before, increasing our life expectancy.
Right now, the State Pension age in the UK is 66, but it is set to increase to 67 by 2029, with a further rise to 68 due between 2037 and 2039.
While the triple lock has worked successfully for the goldilocks economy (not expanding or contracting too much), the pandemic has skewed growth in wage and employment figures, in part due to the furlough scheme.
The full effects of this are yet to be discovered, but if the younger generations start saving now, they can safeguard any further fallouts from the pandemic that have put pressure on the pension budget. Aside from the pandemic, the increase in life expectancy is set to continue growing, posing a threat to the sustainability of welfare systems.
There is a general consensus that the annual increase in pension payments will eventually impact the younger generations (namely Millennials and Generation Z), leaving them falling short, relying heavily on inheritance and private pensions.
Unfortunately, social policy is not always fair. While we may look to older generations to illustrate how we might expect our future to look, there are many uncertainties to unfold in the duration of our lifetime. And while Penfold’s glass is half full, there is a resounding concern that the State Pension will become rather anaemic in years to come, compared with Generation X and Baby Boomers.
At Penfold, we strongly believe that the earlier you start saving into a Personal Pension, the better. When we're young, we tend to have a propensity to live in the here and now, something that Penfold fully supports. However, individuals that combine that mindset while putting aside small contributions towards their future will reap the reward in their later year's thanks to compound interest and the growing value of investments they made early on. A personal pension can supplement a State Pension to increase your standard of living in retirement.
It’s hard to project just how robust the current triple lock pension welfare system is, but either way, the best way that younger generations can safeguard their later years is by setting up a personal pension plan. Many Millennials are unaware they can set up a private pension alongside a workplace pension; the two pensions are not mutually exclusive.
Kay Ingram, Director of Public Policy at LEBC, comments on how the younger generations can protect their financial future by putting aside small contributions, "The money individuals put in their pension pot now will earn them a lot more in compound interest than the money contributed in their 50s," says Kay.
At Penfold, we think it's important to live life and enjoy today, instead of always thinking about tomorrow. That's way we made our pension simple and easy to manage. So you can leave tomorrow, to us.
You could set up a personal pension plan for as little as £1 a month, to safeguard your later years and ensure that the last years of your life are living happily and comfortably. And, if you do end up having spare funds, you can enjoy spending your investment on luxuries that otherwise, you may not have been able to enjoy.