What is the state pension?

The state pension is a regular payment you can receive from the government once you reach state pension age. How much you receive depends on the amount you’ve paid in National Insurance contributions. The maximum state pension is currently £155.65 per week, but it’s adjusted each year.

The new state pension

The way the state pension works has recently changed. Previously, there was a two tier system, with the ‘basic pension’ topped up by the contribution-based ‘additional pension’. This has now been replaced with a single ‘new state pension’.

The new system came in on the 6th April 2016. You receive the new state pension if you’ve paid National Insurance contributions (or received credits) for at least 10 years, but you’ll only be eligible for the full amount if you’ve paid contributions for at least 35 years.

How much state pension will I get?

The maximum state pension is currently £159.55 per week, but it’s adjusted each year to take inflation into account. The amount you actually receive is based on your National Insurance record.

You generally pay National Insurance contributions every year you’re working. If you’ve been off work for a particular reason (to care for a child, or for a long-term illness, for example) you can still receive National Insurance credits.

As a rough guide, the government suggests that for each year you accrue National Insurance credits from April 2016 onwards, you’ll add about £4.45 to your weekly state pension amount.

However, the whole thing is complicated by the fact that people who were working when the old pension system was in place may receive a higher amount so that they don’t lose out due to the changes.

For more details, check the government’s website.

When can I claim the state pension?

The age at which you can claim the state pension is going up. For many years it was 65 for men and 60 for women, but it’s increasing and it will continue to increase over the next few decades, until eventually it’ll be calculated based on average life expectancy.

People in their twenties now are currently predicted to have a state retirement age of at least 68.

Once you reach state pension age, you don’t have to stop working. If you do carry on working, you no longer need to pay National Insurance contributions. If you delay claiming your state pension then you may be eligible for extra money when you do retire.

Can I live off the state pension?

If you accrue the full 35 years of National Insurance credits, under the new scheme you could expect to receive a state pension of up to £8,296 a year.

According to recent research, a single person needs an annual income of £17,000 to live comfortably in the UK.* You may need less money when you retire (as you won’t have commuting costs and you may have paid off your mortgage, for example), but the state pension is still unlikely to be enough to live off, even if you receive the maximum amount.

It’s therefore really important to save into a personal pension and/or a workplace pension so that you will have a decent income for your retirement.

About PensionBee

PensionBee can help you to combine all your old pensions in one place. You can manage your retirement saving online in one place, and use our pension calculator to set a retirement goal and see how you may be able to reach it. You can set up regular contributions and make one-off payments quickly and easily from your online account.

Join PensionBee now and take control of your pension saving.

* Source: Joseph Rowntree Foundation report

Last edited: 06-06-2017

Have a question? Call our UK team 020 3457 8444

Have a question?

Call our UK team

020 3457 8444

Monday-Friday 9am-6pm