The Ultimate Guide to the UK State Pension

  • Article looking at the UK State Pension

The Ultimate Guide to the UK State Pension

In this article we take a look at the current UK state pension scheme and how much state pension you are likely to receive when you retire.

The UK Basic State Pension is a regular payment made by the government to eligible individuals who have reached the state retirement age in the UK. It is designed to provide a basic level of retirement income to support people in their old age, and help them meet their everyday living expenses.

The amount of weekly pension payment you receive depends on various factors including how many years of National Insurance contributions you have made along with any pension credit during your working life and any additional State Pension entitlements you may have accrued.

It’s important to understand the new state pension rules so that you can plan for your retirement effectively.

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How Much Is The New State Pension?

The full new State Pension is currently £221.20 per week (as at April 2024)

How much is the UK State Pension for a married couple?

There are no longer any special state pension arrangements for married couples in the UK.

A married couple can receive two separate State Pensions, which are based on each individual’s National Insurance contributions. The amount of State Pension you can get will depend on your individual circumstances as outlined in the eligibility section below.

If one partner has not worked or has not paid enough National Insurance contributions to qualify for a full State Pension, they may be entitled to ‘Pension Credit’. This is means-tested and is designed to provide additional support for couples who have a low income.

You don’t have to be married or in a civil partnership, you’re considered a couple if you live together.

State Pension Eligibility

State Pension Age

To be eligible for the UK State Pension, you must have reached state pension age, which is currently 66 years for both men and women. However, this is set to increase in the coming years, with plans to raise it to 67 by 2028 and to 68 between 2037 and 2039.

You can check your State Pension age on the Government’s website using your date of birth and gender:

It’s important to keep up-to-date with any changes that may be made to the retirement age, as this can affect your pension entitlements and retirement plans.

Age Based Exceptions

For a woman born before 6 April 1953 and a man born before 6 April 1951, the state pension rules include some special considerations.

These individuals may be eligible for the ‘Additional State Pension,’ also known as the State Second Pension or SERPS (State Earnings-Related Pension Scheme). This is an additional benefit designed to top up the basic state pension.

How many years National Insurance contributions do I need for a full basic state pension?

You’ll usually need to have a minimum of 10 qualifying years on your National Insurance record to receive any State Pension at all.

You’ll need 35 qualifying years to get the New Full State Pension, if you do not have a National Insurance record before 6 April 2016.

If you have between 10 and 35 years’ worth of NI contributions or credits, your pension payments will be calculated on a pro-rata basis.

You can check your state pension forecast on the Government’s website:

Credits for caring responsibilities and certain benefits

You can have gaps in your National Insurance record and still get the full new State Pension.

For example, if you have caring responsibilities for children under the age of 12, or for a disabled person, you may be eligible for National Insurance credits which can count towards your State Pension. These are known as Carer’s Credits and can help to fill gaps in your National Insurance record if you’re unable to work as a result.

In addition, if you receive certain benefits such as Jobseeker’s Allowance or Employment and Support Allowance, you may also be eligible for National Insurance credits which can count towards your State Pension. These are known as Class 1 credits and can help to ensure that you don’t lose out on State Pension entitlements while you’re not working.

Gaps in state pension

Changes To The State Pension System In Recent Years

There have been several changes to the state pension system in recent years, with the aim of making it fairer and more sustainable.

One of the most significant changes was the introduction of a new single-tier State Pension in April 2016. This replaced the previous two-tier system (basic State Pension and Additional State Pension) and is designed to be simpler and more predictable than the old system, with a single amount payable based on an individual’s NI record.

Another change was the increase in the State Pension age for both men and women. The State Pension age for a woman has been gradually increasing from 60 to 65, in line with men’s State Pension age, which has also increased from 65 to 66. Further planned age related changes have been covered above.

How To Claim Your State Pension

Once you reach state pension age, claiming your state pension is a straightforward process that can be done online, over the phone or by post. Please note, it will not happen automatically.

If you are eligible, you should receive a letter from the government approximately two – four months before you reach State Pension age, informing you of how much you’re entitled to and explaining how to claim it.

Please note, this may may be different to the age you can get a workplace or personal pension.

To claim your state pension online, you’ll need a Government Gateway user ID and password. If you don’t already have these, you can create them during the application process. To apply by phone, call the Government’s pensions service on 0800 731 7898 (or +44 191 218 3600 if calling from abroad). The lines are open Monday to Friday from 9:30am to 3:30pm. Alternatively, you can fill out a paper form and send it in by post.

When applying for your State Pension, make sure that you have all relevant information available including details about any other sources of income or other benefits that may affect your entitlement. You may also be required to provide proof of identity and address as part of the application process.

It’s important to note that if you delay claiming your State Pension beyond your State Pension age, then the amount you’re entitled to receive may increase. However, this will depend on individual circumstances and it’s recommended that you seek professional advice before making any decisions about when to claim your pension.

Enhancing Your Pension Income

There are several ways to enhance your pension pot and increase the amount of money you’ll receive in retirement.

One option is to make voluntary National Insurance contributions. If you have gaps in your National Insurance record, for example due to periods of unemployment or caring for children, then making voluntary contributions could help you qualify for a higher state benefits. You can check your NI record online to see if you have any gaps and how much it would cost to fill them.

It’s worth noting that there are time limits for making voluntary NI contributions. In general, you’ll have six years from the end of the tax year in which the missed contribution should have been paid to make a voluntary payment. After this time, it may not be possible to catch up on any missed contributions.

Another way to boost your retirement income is through a workplace or personal / private pension. Many employers offer a workplace pension scheme as part of their benefits package, which can be a great way to save for retirement while also benefiting from employer contributions. Alternatively, you may choose to set up a personal pension plan with a financial provider.

Both workplace and personal pensions work by investing your money in stocks, shares and other assets with the aim of growing your savings over time. The amount you’ll receive in retirement will depend on factors such as how much you contribute, the performance of the investments and any fees charged by the provider.

It’s important to remember that pensions are a long-term investment and that there are risks involved. However, they can also be a tax-efficient way to save for retirement and provide an income in later life.

If you’re unsure about how best to enhance your pension pot or want more information about your options, it’s always recommended that you seek professional financial advice before making any decisions.

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Is Your State Pension Taxable?

You pay tax on your pension income just like any other income you receive. However, the amount of income tax you’ll pay will depend on your individual circumstances and how much other income you have.

If your total income exceeds your personal allowance, then you’ll be taxed at the appropriate rate on any additional income.

It’s important to note that if you receive other sources of taxable income alongside your State Pension, such as earnings from employment or rental income from a property, then this will also affect how much tax you’ll pay each tax year overall.

Is Your State Pension Subject To National Insurance?

Whether or not you continue to pay National Insurance contributions on your pension income will depend on your individual circumstances and the type of pension you’re receiving.

If you’re receiving a UK State Pension, then you won’t need to pay any more National Insurance contributions as long as you’ve reached State Pension age. This is because National Insurance contributions are used to fund the State Pension, so once you start receiving it, there’s no need to continue paying in.

However, if you’re receiving other types of pension income, such as from a workplace, personal or stakeholder pension plan, then you may still need to pay National Insurance contributions if you’re also earning an income from employment. This is because National Insurance contributions are based on your earnings rather than the source of your income.

It’s worth noting that if you’re self-employed and receiving a State Pension or other types of pension income, then you may still need to make Class 2 or Class 4 National Insurance contributions depending on your level of profits.

In Summary

The combination of rising living costs and the gradual increases in the state pension age are just a couple of reasons why it’s generally not advisable to rely solely on the full basic state pension you’ll get as your main source of income in retirement.

Take the time to check the amount of state pension you are likely to receive and then consider other income sources before it’s too late.

If you need help with this, please get in touch by booking an appointment below or via email:

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2024-06-04T15:05:16+01:00Pensions|0 Comments

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