The State Pension
The State Pension has always been one of the cornerstones of the government's approach to life after work. But what exactly is it? How does it work? Who qualifies? And how much do you get?
If you can answer these questions, you're probably in pretty good shape. But if want to learn more about the State Pension, we’ve got you covered!
What is the State Pension?
The State Pension is a UK Government scheme that's funded by National Insurance (NI) contributions.
NI contributions are taken from your salary once you have reached certain thresholds. The exact amount you pay in NI is dependent on how much you earn, and whether you're employed or self-employed.
Currently you need to pay National Insurance if you earn over £190 a week for those aged 16 and over.
If you're self employed there are two types of National Insurance payments:
- Class 2 if your profits are £6,725 or more a year
- Class 4 if your profits are £9,880 or more a year
How much is the State Pension?
It depends. If you reached State Pension age before 6 April 2016, the most you will receive is £141.85 per week*. If you reach State Pension age on or after 6 April 2016, however, then the full new State Pension pays out £185.15 a week*. However, both of these amounts can vary depending on your circumstances.
You can learn more about the new State Pension below.
*Figures relate to the tax year 2022/2023 (April 6th 2022 - April 5th 2023).
What is my State Pension Age (SPA)?
Your State Pension age is the earliest age you can start receiving your State Pension, and the exact date depends on when you were born and whether you're male or female.
It's easy to find out what your SPA date is on the Gov.uk website and very helpful to know it. Why? Because when you know your SPA, it will help you think about the money you're saving for retirement now, and how far away that retirement is.
How is the State Pension paid?
Most people are paid directly into their bank account. The day your pension is paid depends on your NI Number, as shown below:
National Insurance payments
|Last 2 digits of your NI number||Day your State Pension gets paid|
|00 to 19||Monday|
|20 to 39||Tuesday|
|40 to 59||Wednesday|
|60 to 79||Thursday|
|80 to 99||Friday|
Will I get the full State Pension?
It depends how many years you've made NI contributions. If you reached the State Pension age before 6 April 2016, you must have paid, or been credited with, NI contributions for at least 30 years to qualify for the full basic State Pension.
If you reach State Pension age on or after 6 April 2016 – and are therefore affected by the new State Pension – then this has changed, and may be further affected if you have contracted out. If you're not sure about your NI contributions, you can order a statement from the National Insurance Helpline on 0300 200 3500, or apply online for your NI statement.
Do I have to take my State Pension?
No. You can defer it – you can decide not to take it for months or even years at a time. And the longer you wait to claim the State Pension, the more you'll get. To find out more, see the Gov.uk website.
I’m retiring abroad, will that affect my State Pension?
You can claim State Pension abroad if you've paid enough UK National Insurance contributions to qualify. For further information please see the Gov.uk website.
How can I find out how much State Pension I’ll get?
You can get an idea of how much State Pension you're entitled to at the moment by using the State Pension e-service on the Gov.uk website.
The online State Pension Forecast will give you a quick self-assessment (but it doesn't provide an estimate of additional State Pension).
If you are aged 50 or over, you can now also get an estimate of what you would receive under the new State Pension scheme by visiting the Gov.uk website or calling and requesting a State Pension statement.
This will give an estimate of your new State Pension based on your current National Insurance contribution record, which can better help you plan for retirement.
Alternatively, you can get in touch with the Future Pension Centre for questions about the State Pension or to ask for a forecast.
What is an additional State Pension?
The Additional State Pension (often referred to as SERPS or State Earnings Related Pension Scheme) is actually made up of 3 schemes. You might have contributed to all depending on how long you've been working.
The main difference between two of the schemes is that since 2002 you can also contribute to the Additional State Pension if you're claiming certain benefits or have lower earnings. The most recent scheme is known as the 'State Pension top up' and is applicable to those who opted in and contributed between 12 October 2015 to 5 April 2017 (you also must have reached State Pension age before 6 April 2016).
What is the new State Pension?
The State Pension changed on 6 April 2016. The new State Pension is intended to be more straight-forward than the previous one, but how does it actually work and will you qualify?
Under the old system you may have received an Additional State Pension as well as the Basic State Pension.
But to get the Additional State Pension you had to have made full National Insurance contributions. Some people didn’t do this. They may have 'contracted out’ under their pension scheme (which means that they paid reduced National Insurance contributions and the scheme provided alternative benefits).
The new State Pension has removed this ‘two-tier’ system in favour of a ‘single-tier’ State Pension. For the tax year 2022/2023 this is a maximum of £185.15 per week or £9,627.80 a year. But you won’t necessarily be entitled to this full amount. It all depends on how many years of National Insurance contributions you have.
Who is affected by the new State Pension?
If you reach State Pension age on or after 6 April 2016 (i.e. you are a man born after 6 April 1951 or woman born after 6 April 1953) you’ll get the new State Pension. If you reached State Pension age before 6 April 2016, your State Pension will be paid under the old system, even if you defer taking it.
How do I know if I contracted out of the new State Pension?
Don’t worry. If you aren’t sure whether you contracted out, when you contracted out or how many years you contracted out for, the Government will have a record of all of this. They will provide you with all of this information when you apply for a State Pension statement.
How much will I be entitled to?
The amount of new State Pension you’ll receive depends on your National Insurance record. To qualify for the full new State Pension (which is £185.15 per week for the tax year 2022/2023) you will need to have 35 years of contributions. And to get any new State Pension at all, you will need to have a minimum of ten years’ contributions.
Contributions could be:
- National Insurance payments
- National Insurance credits, you may have received if you were unemployed, if you were ill, or if you were caring for a relative rather than carrying out paid work.
If you started paying National Insurance before 6 April 2016 your contributions from before this date will be converted into a starting amount for the new State Pension.
If you made full contributions and built up an Additional State Pension, it’s likely that your starting amount will actually be higher than the full amount of the new State Pension. In this situation you’ll get the full State Pension as well as keeping any excess as a protected payment, which will increase with inflation. But you won’t be able to continue to build up any more State Pension.
If you have a starting amount equal to the new State Pension you’ll also receive the full new State Pension amount, and you also won’t be able to build up any more State Pension.
Finally, if you were contracted out under the old system and have paid reduced National Insurance contributions for several years it’s likely that you will have a starting amount that is below the new State Pension. If this is the case you can continue to build up your State Pension amount until you reach the State Pension age, even if you already have 35 years of NI contributions.
How can I build up my new State Pension?
Your new State Pension will be based on your National Insurance record when you reach State Pension age. You can increase what you’ll get by adding to your National Insurance record before reaching this age by:
- Continuing to pay National Insurance contributions until you meet State Pension age.
- Apply for National Insurance credits – these can fill gaps in your NI record.
- Pay voluntary National Insurance contributions – these can also help to fill any gaps in your record.
- Defer when you receive your State Pension – this is another way to build up what you receive.