Money expert Martin Lewis has addressed the risk that the state pension could become means tested in future – as well as possible rises in the state pension age – for those considering paying to boost their pension payouts pot.
Returning on the latest episode of The Martin Lewis Money Show Live on March 4, Martin explained how the deadline is fast approaching to buy back 13 missing National Insurance years. Because the state pension payments you receive are based on your National Insurance record, if you are missing years in your records, you could end up being paid less than the maximum weekly state pension amount. But buying back missing years, to bring you to the 35 you need to max out your payments, could add thousands to your pension payouts over your lifetime. From April 5, though, 13 years you can currently pay to have added to your records will be withdrawn from the scheme, so you risk missing out on the extra cash.
However, on Martin’s latest ITV1 and ITVX show, the money guru was asked about the ‘risks’ that the extra expenditure – currently about £824 for each year you buy – could go to waste if the state pension becomes means tested later on down the line.
Kemi Badenoch, the Conservative leader, went on record to say that she wants to look at means testing the state pension, for example.
Martin said: “Let me be very plain about everything I’ve said. It isn’t 100% risk-free. The gains we’re talking about will take decades to get into your pocket.
“And things can change. They may look good now, but in a high-tech AI robotic sheep future, things can be very different.
“The most likely change isn’t actually that one [means testing], it’s that the state pension age is increased. And I think that certainly could happen. In which case you’d retire… you’d be older when you started and everything would have to be moved a little but it would still work even if you delayed it by three years, on typical life expectancy it would still be very very worth doing.”
Martin then addressed means testing pensions as he added: “There have been some political conversations about it, but no mainstream UK party has it as policy. I think it is an outside risk at best, and if it was and you did this I suspect someone would launch a legal challenge.
“But, if we factor it in, the nearer state pension age you are now, the less of a risk. Because you only need two and a half years of this for it to break even.
“So if you’re going to retire in two or three years, it’s a no-brainer. The potential rewards from this are very large, the risk of that happening is small.
“So in my view, especially if you have easy finances to be able to pay it, reward is good, risk is small, go for it.
“However, if the gain for you is marginal and you are many years away from retirement, then that risk and that unknown future and potential unknown unknowns, is much more offputting.
“I cannot give you a firm answer. But I think means testing – to not do it because of an outside risk of some, niche political discussions about future means testing, I think wouldn’t stop me at the moment when there’s a hard deadline coming.”
The Martin Lewis Money Show Live March 4 episode is still available to watch via ITVX.
