A state pension is a regular payment you can receive from the Government after reaching a certain age. How much state pension you’ll get depends on a variety of factors, and navigating these rules can be difficult. Here’s a quick guide to understanding what your state pension is.
What Is the State Pension Amount?
The state pension you get depends on a variety of factors. The rules most recently changed on 6 April 2016, and your payments can be different depending on if you retired before or after this date.
For those retiring after 6 April 2016, there is a ‘single-tier’ pension payment for:
- Men born on or after 6 April 1951
- Women born on or after 6 April 1953
The ‘single-tier’ pension payment is adjustable. However, in 2020/21, the full level of the state pension is £175.20 a week, which amounts to £9,110.40 a year.
You may receive more or less than this, and we explain the reasons in more detail below.
If you reached state pension age before the rule change and retired after 6 April 2016, your basic state pension is £134.25 a week, or £6,981 a year.
If you reached state pension age before the rule change, you could increase your basic state pension with an additional state pension, through the State Earnings Related Pension Scheme (SERP) or State Second Pension (S2P).
The maximum you can get is an extra £179.41 a week on top of your basic state pension.
What Will My State Pension Be in 2020?
Your state pension entitlement will depend on a few factors.
The first and most significant difference will be when you retired.
As mentioned above, your state pension in 2020/21 will be £134.25 a week if you retired before 6 April 2016.
However, if you reached state pension age on or after 6 April 2016, your pension calculations start from £175.20 a week, which is the ‘single-tier’ pension rate.
The amount you get will depend on your so-called ‘qualifying years’ of National Insurance contributions and certain other factors.
Will I Get Full State Pension?
The ‘full level’ of state pension can be higher or lower and the £175.20 a week payment is simply the baseline for determining your pension.
Two factors influence whether you will receive higher or lower payments.
Your full state pension is affected by:
- Your National Insurance payments. If you have made enough qualifying payments, you’ll receive the full sum of £175.20 a week. If you have fewer payments, you’ll receive a lower amount.
- Whether you’ve ‘contracted out’. Under the old system, you could pay less NI contributions into the system if you were paying for a private pension, such as a workplace or personal pension scheme, and ‘contracted out’. This could mean you have fewer qualifying years. However, those additional entitlements could still count towards your pension in the current system.
To receive the full state pension, you will need 35 qualifying years of National Insurance contributions (30 if retiring before 6 April 2016). Your qualifying years can be from any point in your working life, and you don’t have to accumulate them in a row.
It’s crucial to note that you could earn more than £175.20 a week due to the previous pension system’s S2P and SERPS schemes. While these schemes no longer exist in the current system, the Government has allowed workers in their 40s, 50s, and 60s, who have been ‘contracted out,’ keep these existing entitlements if they choose.
The Department for Work and Pensions (DWP) uses a state pension calculator to determine which amount you would get, always providing you with whichever is higher. The formula considers:
- Your number of full National Insurance years.
- Any contracted out periods you have.
- Any additional state pension you’ve accrued.
What Do I Need to Get Any State Pension?
To get any state pension, you’ll need a minimum of 10 years NI contributions. These qualifying years don’t have to be 10 years in a row, and they can be from before or after 6 April 2016.
If you don’t meet the minimum, you might still be eligible to pension credit.
How Are Qualifying Years Determined?
The pension system is complicated further by the concept of ‘qualifying years’. For a qualifying year, you would have to earn a certain minimum amount of money during a tax year and pay the required NI contributions.
Typically, you will get a qualifying year if you work full-time (35 or more hours per week), even on the minimum wage or just a few days a week throughout a tax year.
The minimum money you need to earn changes from tax year to another. For 2020/21 the minimum sums are:
- £120 a week/ £520 a month/ £6,240 a year if employed.
- £125 a week/ £540 a month/ £6,475 a year if self-employed.
You can also receive NI credit if you are unable to work due to long-term illness or because you are caring for someone.
The following benefits also automatically generate NI credits:
- Universal Credit
- Job Seeker’s Allowance (JSA)
- Employment Support Allowance (ESA)
- Maternity Allowance
- Child Benefit, for children under the age of 12
- Income Support
- Working Tax Credit (with or without a disability premium)
- Entering a government-approved training course (placed by JobCentre)
In certain other events, you might have to apply for those credits to count towards your state pension. For example, if you care for someone for at least 20 hours a week, then you can apply for carer’s credit.
You can check your qualifying years on the Government website.
It’s also possible to replace missing NI years by buying extra years, by paying a lump sum to receive a higher state pension. Those retiring after 6 April 2016 can buy up to 10 years of NI contributions in total.
How Do I Get My State Pension?
You can claim the state pension when you reach the state pension age, which is currently 66 for both men and women.
The state pension age will continue to rise, to 67 between 2026 and 2028, and to 68 between 2037 and 2039.
It’s important to note that the current official retirement age applies to men born on or after 6 December 1958 and women born on or after 6 April 1950.
You won’t receive your state pension automatically. Four months before you reach the state pension age, you will receive a letter detailing how you can claim.
There are currently three ways to claim a state pension. You can:
- Call the state pension phone line at 0800 731 7898.
- Make an online application via Government Gateway.
- Download the state pension claim form from the Government's website and send the completed form to your local pension centre.
Keep in mind that you can deter your state pension if you keep working before the official retirement age. This type of pension planning could be beneficial because you’ll continue adding more qualifying years, leading to a bigger state pension.
Your state pension will be paid into your account every four weeks. If you live abroad, you can choose to get paid every 4 to 13 weeks. If your State Pension is under £5 a week, you’ll only be paid once a year in December. Payments to international bank accounts are made in the local currency, which could change the amount you get depending on exchange rates.