“When can I retire?” is a common question many of us regularly ask ourselves. So whether you plan to retire before the state pension age or want to work as long as possible, it pays to understand what you’re entitled to – and when - before starting your retirement planning.
The state pension age is 66 for both men and women in the UK, but this will increase to 67 in 2028.
However, nobody can make you retire when you hit the state pension age. This is because there has been no such thing as a default retirement age in the UK since April 2011, when legislation changed.
Before this, employers used to be able to force workers to retire at 65. This is not the case now, except in some specific circumstances, such as ill health. You could still face redundancy or dismissal, however.
The state pension you receive depends on how many qualifying years you have. You need 35 qualifying years of national insurance contributions to claim the full new state pension. The full new state pension is currently £185.15 per week. However, if you reached the retirement age before April 2016, you will receive the basic state pension, which is £141.85 per week.
You can increase your state pension by deferring it. For every 52 weeks you defer your state pension after reaching retirement age, it will grow by about 5.8%. This is a great way to increase your overall income in retirement, especially if you feel up to working past your state pension age.
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Can you claim the state pension if you retire early?
No. The state pension age is 66; you cannot claim it before this age.
However, you can still retire early if you wish and can afford it. You will need to support yourself in other ways. You could, for example:
- Use a workplace pension scheme
- Purchase an annuity using your pension pot
- Use a lump sum from your pension pot to fund your retirement
- Use income from other sources such as stocks and shares or rental properties
If you have a private pension, remember you can start receiving income from most private and workplace pensions from 55. However, if you choose to do that, you need to look at how this decision might impact you in later life.
For instance, if you draw down most of your pension before you hit the state pension age, will you be able to have a comfortable life on the state pension alone? Or, will you be able to purchase an annuity large enough to support yourself until you die?
Remember, while the state pension is a lifetime benefit, most workplace pensions are defined contribution pension schemes, so you do not get a lifetime income unless you purchase a specific annuity. You can draw down your entire workplace pension before you die, which will leave you with just the state pension unless you have other income sources.
This may differ if you have a defined benefit or final salary pension plan. In this instance, you may receive a lifetime income.
The flexible retirement option
You could also opt for flexible retirement if you wish to retire early but do not have the means. This means you could claim some or all of your retirement benefits from 55 while still working part-time or in a less senior position.
The idea is that the pension fund will supplement your income while you continue working part-time until you reach the state pension age. This means you can still work fewer hours if you wish but still make enough to support yourself.
Pension planning is complex, and if you wish to retire early, it is best to discuss your options with a financial adviser, who will be able to help you plan your finances based on your desired retirement date.
Are you on track to receive the full state pension?
If you are worried about your state pension entitlement, you can check your state pension forecast via the GOV.UK website.
Your state pension forecast will tell you whether you're on track to receive the full new state pension and when you can claim it based on current legislation.
You will also find out how many qualifying years of national insurance contributions you still need before qualifying for the full new state pension.
If it looks like you won’t qualify for the full new state pension, you may be able to rectify this. For instance, you could make voluntary contributions by paying additional national insurance to compensate for any shortfall.
What happens if you’re not eligible for the full state pension?
If you are not eligible for the full new state pension, you may still receive some pension when you retire. However, you must have ten qualifying years of national insurance contributions to claim any pension.
Your income will be proportional to the full state pension based on your contributions. So, for example, if you have ten qualifying years, you will be able to receive the equivalent of around 10/35ths of the full new state pension - about £53 per week.
What happens if you can’t afford to live after you retire?
While there is no "normal retirement age," you might not be able to work forever, even if you want to. You may fall ill or be made redundant and struggle to find work due to ageism. This could force you to retire, especially if you’ve already reached the state pension age.
But what happens if the state pension you're eligible for is not enough to live on?
Rather than relying on high-interest loans or credit cards, you may be able to claim pension credit. Pension Credit can top up your income to £182.60 per week if you're single or £278.70 per week if you're in a couple.
To qualify, you will need to meet specific eligibility criteria. For example, you will need to have reached the state pension age. If you're in a couple, you must both have reached the state pension age to claim. Alternatively, one of you needs to be receiving Housing Benefit for people over the state pension age.
Mark Donnelly, CEO at Brite Advisors, told Pension Times: "It's unlikely that a state pension will be a sufficient amount of money for people to live on in their retirement years, which is why it's wise to consider your state pension as a supplement to your personal retirement provisions. Maximising your savings and personal pension contributions can ensure you meet your retirement goals. Also, seeking quality financial advice is always recommended to ensure your personal pension provisions are managed in the best way possible."
How much state pension can you get if you defer?
Your state pension increases by about 1% for every nine weeks you defer it. This equates to a rise of around 5.8% per year. If you have an alternative income, such as a workplace pension or personal pension that covers your living costs, you may choose to defer your state pension.
This means that when you eventually claim your state pension, you will have a larger income. For example, if you deferred the current state pension for one year, your new weekly amount would jump from £185.15 to £195.80 - a yearly increase of around £550.
The table below highlights how much your pension would increase if you defer it by up to 5 years.
| Years deferred | New amount (per week) | New amount (per year) |
0 | £185.15 | £9,627.80 |
1 | £195.8 | £10,181.6 |
2 | £207.15 | £10,771.8 |
3 | £219.16 | £11,396.32 |
4 | £231.87 | £12,057.24 |
5 | £245.31 | £12,756.12 |
You may choose to defer your state pension if you want to increase your pension income in retirement. This could be because you believe your retirement savings are not enough to support you based on your life expectancy.
The state pension: when can you claim it
The state pension is a government-funded retirement income that all eligible retirees can claim. The current state pension age is 66 years old for both men and women.
There isn’t an official retirement age at which point you must retire. However, you can only receive the state pension once you reach the state pension age. So, if you opt to retire early, you will need to pay your way until you reach the state pension age.
If you are concerned about your retirement income, you may choose to defer your state pension and work longer. This will result in around a 5.8% annual increase, which may help pay the bills in later life.
However, it's important to note that the state pension is not designed to provide a comfortable retirement income. You will likely also need to rely on private pensions, savings and other sources of income to maintain your standard of living in retirement.
