Many people have a combination of a state pension, a private pension, and a workplace pension, making it a complicated business to understand exactly how much you will receive when you stop working. Here, we’re focussing on the state pension in the UK, how it works, and what’s changed in recent years.
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Types of State Pension UK
The state pension is a regular payment from the government that most people can claim once they have reached a specific age, known as the state pension age. The aim of a pension is to provide people with income to meet their living costs once they are no longer working (they have retired) or are working reduced hours (semi-retirement).
Not everyone gets the same amount in their state pension. How much you can claim depends on your National Insurance record and the number of ‘qualifying’ years of National Insurance payments you have. Qualifying years include contributions that you have made while you are working and anything that has been credited to you when you are unable to work (for example, you are receiving Employment and Support Allowance or Jobseeker’s Allowance).
There are differences in what you can claim depending on when you were born and whether you are claiming the new or old state pension.
Note that you have to claim your state pension. You do not receive it automatically.
New vs Old State Pension
The government introduced a new state pension on 6 April 2016. Their aim was to simplify the system.
New State Pension Scheme
- This applies to people who reach state pension age from 6 April 2016 onwards. For women, this includes people born after 6 April 1953. For men, this includes people born after 6 April 1951.
- It is based on the number of National Insurance’ qualifying years’ you have and when your National Insurance record started.
Old State Pension Scheme
- This applies to people who reach state pension age before 6 April 2016.
- A two-tier system (‘basic’ and ‘additional’) was used, which was complicated and made it hard to determine how much money you would receive until you were close to the state pension age.
What is State Pension Age UK?
The state pension age depends on when you were born. It is currently 66 for people born before 5 April 1960. Everyone born after this date has a state pension age of 67 at the moment, but this is due to increase to 68 between 2044 and 2046.
Under the Pensions Act 2007, the government reviews the state pension age every five years.
The government has a calculator to help you work out your state pension age.
How does the State Pension Work?
The state pension is money the government pays an individual who has made a minimum contribution to National Insurance during their working life. You have to claim your state pension; it does not automatically start.
The state pension stops on your death. However, a spouse may be able to claim part of it if you were claiming the old state pension.
How to Delay or Stop Your State Pension
If you want to delay your state pension, you do not have to do anything. It is automatically deferred until you claim it. You may decide to delay claiming your state pension to earn money for longer and increase the amounts you receive when you do claim.
If you have started receiving your state pension and decide you want to stop it (for example, to earn more money), you can do this once. However, you cannot stop it again once you restart it.
FAQs
How Many Years Of National Insurance Contributions Do I Need For A Full State Pension?
You need 35 ‘qualifying years’ of National Insurance contributions to receive the full pension when you reach state pension age. Qualifying years include contributions you have made while employed and other contributions from benefits such as Employment and Support Allowance or Jobseeker’s Allowance).
If you have fewer than 35 qualifying years, you will receive less than the full amount of state pension available. This calculation is based on how many years you do have.
A minimum requirement is ten years of contributions to receive a state pension.
How Much State Pension Will I Get At 66?
If you are not already 66, you can use the government’s forecasting tool to calculate how much state pension you will receive when you reach retirement age. The tool considers factors such as the contributions you have made that are included on your National Insurance record and whether you were involved in specific programmes (for example, if you or your employer paid additional contributions) that were available under the old state pension.
Note that the government reviews the state pension age every five years, so the information provided by the forecasting tool will likely change. The next review is planned within two years of the new parliament.
How Much Is A Full State Pension In England?
If you have reached state pension age and receive the new state pension, a full pension is £221.20 a week for 2024-25.
Not everyone will receive this amount. The following factors impact how much you receive as a state pension:
- the number of National Insurance qualifying years you have
- if you were contracted out of the state pension or paid into the additional state pension before 2016
If you receive the old state pension, the basic state pension is £169.50 weekly for 2024-25. The additional rate depends on factors that are specific to your circumstances.
The rate agreed for state pension payments is linked to the consumer prices index and average percentage growth in wages in the UK.
Can I Claim The State Pension And Carry On Working?
You can continue to work and claim the state pension. However, it’s worth noting that the state pension is taxable, so your pension plus your earnings could change your tax band. Also, the money you earn doesn’t affect how much you receive as a state pension, but it could impact what other benefits you are entitled to such as council tax support, pension credit, and housing benefit.
If you reach state pension age and continue working, you don’t pay National Insurance.
