The State Pension is a vital source of income for millions of retired people across Britain. However, the system can be complex and it’s important that you know how it works. The long and short of it is, if you’re looking to maximise your income in retirement, a good place to start is with your State Pension.
In this guide, we will discuss what the State Pension is, how much you can expect to receive, as well as looking at factors that can impact on it.
What is the State Pension?
The state pension is a weekly payment from the government that you receive when you reach state pension age.
The amount you get will depend on several factors, including your record of National Insurance contributions.
What is state pension age?
The age at which you can start claiming the state pension is currently 66 for men and women.
It will rise to 67 by 2028, and 68 between 2037 and 2039.
Do I have to retire when I reach State Pension age?
No, you do not. Once you reach the State Pension age, you do not need to stop working but you’ll no longer have to pay National Insurance.
What are the eligibility requirements for the State Pension?
To receive the basic State Pension, you must have paid or been credited with National Insurance contributions for a minimum number of years (more later).
You can claim the basic State Pension if you’re a man born before 6 April 1951, or a woman born before 6 April 1953. If you were born later, you’ll need to claim the New State Pension instead.
You’ll usually need at least ten qualifying years on your National Insurance record to receive any State Pension, but they do not have to be ten consecutive years to qualify. To receive a full state pension, you will need to have paid 35 years of contributions
The minimum of ten years contributions only applies to the New State Pension. If you are eligible for the old one, you would be paid on a proportionate basis based on how many years contributions you have made.
In short this means that for at least ten years you must have done one of the following:
- Worked as an employee and paid National Insurance contributions.
- Been self-employed and paid Class 2 contributions at a flat weekly rate and Class 4 contributions yearly.
- Received National Insurance credits, for example, if you were unemployed, ill or a parent or carer.
- You were paying voluntary National Insurance contributions.
You might also qualify if you’ve paid married women’s or widow’s reduced rate contributions. Check the Government’s website for more details.
How much is the Basic State Pension?
Currently, in the 2022/23 tax year, the full Basic State Pension is £141.85 per week. You may be able to increase your Basic State Pension through your spouse or registered civil partner or inherit some of your spouse’s or registered civil partner’s State Pension when they die.
If you are married or in a registered civil partnership, you might be able to receive up to £82.45 per week if either you’re not receiving a Basic State Pension or you’re not receiving the full amount.
What is the New State Pension and how much is this?
The New State Pension replaces the old system of Basic State Pension and Second State Pension. You’ll be able to claim the New State Pension if you are a man born on or after 6th of April 1951 or a woman born on or after 6th of April 1953. If you reached State Pension age before 6 April 2016, you would receive the old Basic State Pension.
Prior to 2016, the state pension was made up of two parts – the basic state pension and the additional state pension. The New State Pension combines those into a single amount, which is higher than the basic state pension.
The full New State Pension is £185.15 per week, as of the tax year 2022/23. The actual amount you receive will depend on your National Insurance record. To receive the full amount, you will need to have paid at least 35 years of contributions.
Can I receive both the Basic State Pension and New State Pension?
Unfortunately, not. The type of state pension you will receive is based solely on when you were born (see above).
Does the State Pension rate change?
Yes, it does. The government reviews both the Basic and New Style State Pension rates every year. This is normally done using the triple lock rules, but this has been temporarily set aside for this year due to COVID and the cost-of-living crisis.
What exactly is ‘triple lock’?
The triple lock is a policy commitment by the Government that states that they will raises the State Pension annually in line with the highest of the following three things:
- Inflation – that is the increase in prices of goods and services.
- Increase in average earnings.
- A base 2.5%.
The triple lock was part of a package of reforms including the rise in State Pension age and it basically ensures at least a 2.5% rise each year but can be much higher if inflation or wage increases are above this amount.
For the tax year 2022/23 the triple lock rules have been overlooked due to record inflation and wage increases. As such this year the rate of increase was set to a flat 3.1%.
How do I claim the State Pension?
If you live in the UK, you won’t receive your state pension automatically when you reach state pension age.
You’ll get a letter four months before you retire, which will detail how you can claim.
There are three ways in which you can claim:
- Over the phone by calling the state pension claim line.
- Online by registering with Government Gateway via the Department for Work and Pensions website.
- By downloading the state pension claim form and sending it to your local pension centre.
Saving for retirement is incredibly important in the modern world and the State Pension is vital for many people when reaching retirement.
We hope you’ve enjoyed our guide. For more helpful information, check out the rest of our website.
- Calculate wages, incentives & surcharges
- Payroll made for SMEs
- Payroll integration & 3rd party export
- Friendly Support Team