UK state pension: Everything you need to know

UK state pension: Everything you need to know

 · 7 min read

Your state pension will likely form a substantial chunk of your retirement income. But how exactly does it work? And what can you expect to receive?

  • If you are eligible for the new state pension, you can expect to receive a maximum of £179.60 per week or £9,300 per year
  • The average person needs £19,000 per year for a comfortable retirement if they live alone and own their home outright
  • You will need at least 35 qualifying years where you have paid national insurance contributions to be eligible for the full state pension
  • There are ways to top up your entitlement if you do not qualify for the full state pension
  • Your state pension: FAQs

    • What is the maximum state pension I can receive?

      The full new state pension is £179.60 per week, but the exact amount you receive will depend on your national insurance record. If, however, you are a man born before April 6, 1951, or a woman born before April 6, 1953, you'll be eligible for the basic state pension instead, which is set at £137.60 per week. 

    • How many qualifying years of national insurance contributions do I need for the full state pension?

      You will need to have paid national insurance contributions for 35 years to receive the new full state pension. To get any state pension, you will need to have paid national insurance contributions for 10 years. However, if you're claiming the basic state pension, you will only receive the full amount if you have paid national insurance contributions for 30 years. If you haven't, you will receive a proportion based on your total contributions. 

    • What is the current state pension age?

      The current state pension age is 66 for everyone. That means you need to be 66 years old to start claiming the state pension. You can retire earlier if you wish, but you will have to rely on another source of income until your retirement age. This age is likely to go up, so you must consider this. If you want to receive the full state pension, you should make sure you have made sufficient national insurance contributions to do so.

    • How does the state pension work if I am self-employed?

      If you are self-employed, you are still eligible for the state pension. However, you will need to pay national insurance contributions, which will be calculated as part of your self-assessment tax return. As long as you have 35 qualifying years, you will be eligible for the full state pension. But you should never rely on the state pension alone for your income; you should make separate arrangements for the additional income you might need.

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    If you are approaching the state pension age, you may be making plans to retire. Once you turn 66, assuming you have made sufficient national insurance contributions, you will be eligible to receive the state pension. The full new state pension as of 2022 is £179.60 per week. This equates to an income of just over £9,300 per year. 

    That figure may seem low to you, and that's because it is. A modest retirement, covering just the essentials, will cost you around £13,000 if you're single and about £18,000 if you're in a couple. A comfortable retirement with some luxuries will set singletons back an estimated £19,000, and couples will need to spend £26,000. These figures assume you own your home outright. 

    You shouldn't rely on the state pension alone to provide a comfortable lifestyle in retirement. Whether you have a workplace pension, a private pension, or alternative plans for an income after you retire, you should ensure you will receive enough to meet your needs. 

    Your ideal retirement age may also differ from the state pension age, so an additional income may be essential. State pension policy is under constant review, and further changes to the retirement age are coming. Several pension calculator tools can help you work out the ideal amount for your circumstances. 

    Your state pension will likely form a significant chunk of your retirement income. As such, you must understand what you are entitled to, how you can bridge any potential gaps, and how you can make your pension go further. 

    State pension types 

    Depending on your date of birth, you will be eligible for the basic state pension or the new state pension

    The basic state pension is £137.60 per week. You claim the basic state pension if you are a man born before April 6, 1951, or a woman born before April 6, 1953. If you were born after these dates, you can claim the new state pension, currently £179.60 per week. 

    The basic state pension is lower than the new state pension, but you may be eligible for additional state pension payments to top up your entitlement. 

    If you are yet to retire, you will be claiming the new state pension. 

    While the full state pension is set at £179.60 per week, the exact amount varies depending on your qualifying years. A qualifying year is a tax year during which you have paid national insurance contributions or claimed national insurance credits. 

    Ensuring you're eligible for the new state pension 

    Your date of birth isn't the only factor at play when calculating your entitlement. In fact, you're not guaranteed a state pension payout at all unless you meet specific criteria. 

    You will need to have racked up at least 10 qualifying years to claim the new state pension. You will then be entitled to a proportion of the maximum amount of £179.60 per week. You will need at least 35 qualifying years to claim the full amount. But they don't have to be 35 years in a row. 

    So how do you ensure you're on track to achieve this? There are several ways to accrue qualifying years: 

    • You will automatically pay national insurance contributions through your employer if you earn over £184 per week 
    • If you are self-employed, you will need to complete a self-assessment and pay national insurance contributions accordingly 
    • If you are not working, you could claim national insurance credits if you are ill, disabled, a carer, or unemployed but looking for work 
    • You could pay voluntary national insurance contributions if you are not working or claiming national insurance credits. 

    The GOV.UK website provides a free tool that calculates your current qualifying years and shows you any voluntary national insurance contribution payments you can make. 

    How do national insurance credits work? 

    National insurance credits allow you to accrue qualifying years even if you are not currently working. This means you could still retire with the full state pension. However, you will need to meet specific criteria to qualify, which will not always happen automatically. 

    For instance, if you are unemployed but looking for work, you will receive national insurance credits automatically if you are claiming Jobseeker's Allowance. However, if you are unemployed and not claiming Jobseeker's Allowance, you will need to call your local Job Centre to inform them that you wish to claim national insurance credits. 

    You can claim national insurance credits in other circumstances too. For instance, if you are a carer, on maternity leave, on adoption leave, or claiming certain benefits like universal credit, you may be eligible. 

    A helpline is available via GOV.UK if you need to check your national insurance credits eligibility. 

    How do voluntary national insurance contributions work? 

    Voluntary national insurance contributions could help ensure you get the full state pension where you can't claim national insurance credits and haven't paid national insurance for a particular year. 

    By paying voluntary national insurance contributions, you could ensure you have enough qualifying years to claim the full state pension when you reach retirement age. 

    But it doesn't always make sense to make these additional payments, especially if you have a few years before retirement that could allow you to hit the number of qualifying years required. 

    You can check if you have any gaps in your national insurance record here

    How pension credits bridge the gap between your needs and your state pension

    Pension credit allows people to bridge the gap between their needs and state pension entitlement. Unfortunately, if you live in Northern Ireland, you will not be eligible for this benefit. 

    This is a means-tested benefit available to people who have reached retirement age. If you have a partner, defined as either a husband, wife or civil partner, you will both need to have reached retirement age, or one of you will need to be getting housing benefit for retired people. 

    As it is means-tested, your income is looked at, and you could claim an amount that would top up your income to £177.10 per week if you're single and just over £230 a week if you're a couple. 

    You need to be aware that if you have chosen to defer your state pension willingly, this will be counted towards your 'income'. The same applies to any work pension you have chosen not to claim yet. 

    You can contact the pension service if you have queries about your state pension. You can find your pension centre via the Department for Work and Pensions (DWP) tool if you're already claiming your state pension or pension credits. 

    Claim state pension later and claim more

    If you want to work out how much state pension you could get, you could use the state pension forecast tool on the GOV.UK website. This tool will also offer ways you can increase your entitlement. 

    While pension increases happen every year in April, this is still not guaranteed to meet your needs. If you are interested in why and how the state pension increases, check out our article here

    If you find that your pension scheme and UK state pension entitlement won't give you the lifestyle you were hoping for, you may consider postponing the regular payments guaranteed through your state pension entitlement. 

    This is called deferring your pension. If you opt to defer your pension, it will grow by 1% for every 9 weeks you defer it. So, for example, if you defer it for 52 weeks, your state pension will increase by 5.8%, which could provide you with much-needed income when you do claim your pension. 

    UK state pension: Everything you need to know

    If there is one thing the coronavirus pandemic has taught us, it is that we need to plan for the unexpected when it comes to our financial situation. Love it or hate it, your state pension entitlement is likely to form a significant chunk of your income in retirement.

    Whether you've missed out on national insurance contributions or are struggling to pay into a pension scheme, there are steps you can take to ensure you will receive the full state pension and the income you need to retire. 

    Arming yourself with the knowledge to do that is the first step to successful retirement planning. 

    Stela Gineva
    Stela Gineva
    Stela joined Age Group in May 2021 and is an expert around a variety of finance topics, particularly financial planning and pensions. Stela lives in a picturesque Yorkshire village with her boyfriend and enjoys gardening and reading.
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