The state pension pays out £175.20 a week, every week, from the day you reach retirement age for the rest of your life.
Provided you you qualify.
And new research from pension consultants LCP shows as many as seven million people are making mistakes that will see their payouts cut from this amount to potentially nothing at all.
That's because to claim the full state pension you need to first chalk up 35 "qualifying years" of National Insurance credits.
Each credit is worth £250 a year in retirement - with people needing at least 10 to get any payout at all.
Worryingly, millions of people are missing out on credits they are due - seeing them risk a poorer retirement and lose potentially tens of thousands of pounds of income - simply because they don't know they can claim them.
The good news is that - provided you've not hit retirement age yet - there's still time to make up those missing credits.
Steve Webb, partner at LCP and former pension minister, said: “The system of National Insurance credits is vital in helping millions of people to protect their state pension at times when they are not in well paid work.
"But far too many people – and women in particular - are missing out on the credits that are there to help them."
Claiming credits where they're due
National Insurance credits can be earned for much more than just having a job.
Credits are available for everything from bringing up children, caring for a disabled person, being in low paid work and even serving overseas as a military spouse.
Claims for some credits can also be backdated for many years - one type of credit by nearly a decade and another all the way back to the mid 1970s.
But you have to claim them.
Some people also miss out on credits because the ‘wrong’ person claims the qualifying benefit - seeing credits that could be worth thousands passed to someone who can't use them.
Webb added: "Parents need to make sure that they claim National Insurance credits even if they are on a high income, and couples need to make sure that they put their child benefit in the name of the lower earner.
"Carers should also claim credits even if they are not on carers allowance, as long as they are spending 20 hours a week looking after someone.
"There are billions of pounds in state pension rights being thrown away every year and the Government needs to do much more to make sure people take up what they are entitled to”.
The main areas of non take-up of National Insurance credits are:
Carers not on Carers Allowance – people caring for 35 hours a week and claiming Carers Allowance automatically get credits; those doing 20 hours of caring can also claim a credit, but take-up is poor -the DWP estimates that at any one time only 10,000 to 15,000 people are claiming this carers credit out of more than 100,000 who it has estimated could benefit
Couples not claiming child benefit to avoid a tax charge - the right approach for those in this position is to claim just for the credits; there is no time to be lost for these families, as new claims can only be backdated for 3 months;
Couples where the higher earner is also claiming the child benefit – if the higher earner in a couple has their name on the child benefit claim, the person who needs the credit may be missing out - HMRC has estimated that there are around 200,000 couples where the ‘wrong’ person is claiming benefit and where the other partner is missing out as a result
Other areas LCP point to where people could claim include:
- Grandparents and other family members caring for a child
- During maternity/paternity/parental leave
- During Sickness / Unemployment / Low income
- Low paid employment
- Military Spouses
LCP has produced a full guide to understanding what credit you could be missing out on.
