Martin Lewis has given his verdict on the potential means-testing of the state pension and shared how Britons could boost their retirement savings.
The Money Saving Expert founder issued an urgent warning to Britons about a fast-approaching deadline that could impact their retirement finances.
During ITV 1’s The Martin Lewis Money Show Live earlier this week, he addressed potential future changes to the state pension system during his show.
He noted that the most likely change would be a sooner-than-expected increase in the state pension age amid concerns over the long-term viability of the triple lock.
“I think that certainly could happen,” Lewis said, but reassured viewers that buying back years would still be worthwhile.
On the possibility of means testing, Lewis was less concerned: “There have been some political conversations about it, but no mainstream UK party has it as policy.”
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Martin Lewis is sharing how to boost your retirement savings by £13,000 amid talk of state pension means-testing
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He described it as “an outside risk at best” and suggested any implementation would likely face legal challenges.
For those further from retirement, Lewis noted the uncertainty but still recommended action before a vital deadline.
The financial journalist reminded the country that people have until April 5 to buy back up to 13 missing National Insurance years.
This opportunity could add thousands to lifetime pension payouts. After this date, the option to pay for these additional years will be removed from the scheme.
Lewis also revealed a lesser-known benefit called Grandparents Childcare Credit that can boost pension payments by up to £13,000 at no cost.
State pension payments are calculated based on your National Insurance record, with 35 years of contributions needed to qualify for the full amount. Currently, the full state pension stands at £221.20 per week.
Missing years in your National Insurance record could result in receiving less than the maximum weekly amount.
The option to buy back these missing years provides an opportunity to significantly increase future pension payments.
The cost of buying back each missing National Insurance year is currently around £824. On his March 4 show, Lewis addressed concerns about this investment potentially being wasted if the state pension is means-tested.
“Let me be very plain about everything I’ve said. It isn’t 100 per cent risk-free,” Lewis cautioned. However, he emphasised that for those near retirement age, the benefits far outweigh the risks.
“If you’re going to retire in two or three years, it’s a no-brainer,” he advised. “The potential rewards from this are very large, the risk of that happening is small.”
He noted that just two-and-a-half years of pension payments would be needed to break even on the investment.
Lewis also revealed a valuable but often overlooked benefit that can boost state pensions without any cost.
During his show, his co host Jeanette Kwayke shared a letter from a viewer who had successfully claimed Grandparents Childcare Credit after hearing about it on his programme.
The viewer wrote: “After hearing about this I was able to claim a few missing years whilst looking after my granddaughter.”
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They added that this saved them from having to pay £1,600 to secure a full state pension. The process took eight months due to a backlog, but ultimately proved successful.
Lewis emphasised the significant financial impact of this credit on retirement income. Grandparents Childcare Credit works by transferring tax credits from a parent who takes time off work to a grandparent who provides childcare instead.
This gives the grandparent an additional National Insurance year for their pension calculation at no cost.
“Assuming that’s two years that you bought then that’s £660 a year on your state pension,” Lewis explained.
“If you live for 20 years then you’re talking £13,000, it’s not £600 its £13,000 on your state pension.” Only childcare provided before reaching state pension age qualifies.
However, claims can be backdated all the way to 2011. “This is just such big money,” Lewis emphasised.
