Can young people rely on the state pension?

Given the state pension is the foundation up which most people’s retirements are built, you’d hope there would be certainty over what you might get when you reach state pension age and what that state pension age will be. While I can tell you how the state pension works today and what your state pension age will be under current legislation, for younger people in particular there is every chance those goalposts will be shifted one way or another during your lifetime.

Let’s kick off with the fundamentals. Those reaching state pension age after April 2016 should be entitled to receive the new state pension, which is worth a maximum of £230.25 per week in 2025/26. This benefit currently increases each year by the highest of average earnings growth, inflation or 2.5% - the so-called ‘triple-lock’. This means the value of the state pension will at the very least keep pace with rising prices and average wages and increases in ‘real’ terms in relation to both when they grow at less than the 2.5% underpin.

To get the full state pension, you need a 35-year National Insurance (NI) record, while you need a 10-year record to qualify for any state pension at all. For every year missing from your NI record, a deduction will be made from your entitlement. If you are approaching state pension age and have gaps in your record, it is possible to fill them either by paying Voluntary NI or claiming free NI credits if you have taken time out of work for certain reasons, such as caring for children or elderly relatives.

For now, the state pension age is 66, but this will rise to 67 between 2026 and 2028, and then again to 68 between 2044 and 2046. That means as of today, someone in their 30s, for example, will have a state pension age of 68. You can check your state pension age easily by putting your date of birth into this GOV.UK online tool. It’s important to remember that whatever your state pension age, you will need to claim the benefit from the government – you should receive a letter inviting you to claim around four months before your state pension age.

What does the future hold?

As things stand, the only concrete state pension policy politicians are willing to talk about is the ‘triple-lock’ pledge, with the Labour government committing to maintaining these gold-plated increases for at least the rest of this Parliament. There are currently no plans to bring forward the rise in the state pension age to 68 or increase the state pension age beyond 68 for future retirees.

However, there are strong reasons to believe the status quo won’t remain. Firstly, at some point the triple-lock will have to end, which will require the government to set out what it believes the state pension should be worth and how it should increase in future.

Secondly, the costs of paying state pensions are already significant and are set to grow in the coming years. The latest Office for Budget Responsibility assessment projects that pensioner spending will rise to £182 billion by the fiscal year 2029/30.

If projected life expectancies and state pension costs continue to rise it seems inevitable that the state pension age will rise too – although to what level and when is impossible to say.

In the absence of certainty from government on the state pension, the best thing you can do is take control of your own retirement provision, saving as much as you can, as early as you can, taking advantage of any employer contributions available, upfront tax relief and tax-free investment growth.