What is the state pension?

The State Pension is a regular payment you can get from the government once you reach State Pension age. To qualify you must have paid National Insurance contributions during your working life.

The new State Pension

On 6 April 2016 the ‘new State Pension’ was introduced, replacing the old two tier system of ‘basic pension’ and contribution-based ‘additional pension’. To qualify for the new State Pension you’ll need to have paid National Insurance contributions (or received eligible credits), for at least 10 years. And to receive the maximum amount, you’ll need to have paid National Insurance contributions for at least 35 years.

Your personal or workplace pension is a separate pension which is based on contributions you or your employer make during your working life. You can learn more about the different types of pensions and how they work in our pension FAQ.

How much State Pension will I get?

The amount of State Pension you receive is based on your National Insurance record, which is built up as you work. If you’ve been unable to work for a qualifying reason (such as caring for a child or elderly relative, or for a long-term illness), you can still contribute to your National Insurance record with 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.

The Full State Pension is currently £164.35 per week or £8,546.20 a year (2018/19), and is adjusted each year based on inflation. This is the maximum you’ll be entitled to once you reach State Pension age. However, if you’re a man born before 6 April 1951 or a woman born before 6 April 1953, you may be eligible to receive a higher amount due to the age you were when the new State Pension rules came into effect. For more details, check the government’s website.

You can also use our pension calculator to set a yourself a retirement goal and see how much you’ll need to save each month to reach your target.

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 by the end of 2018 the State Pension age for women will rise to 65. It’s increasing further for men and women to 66 by 2020 and 67 by 2028.

Over the next few decades it’s expected to rise again until eventually it’ll be calculated based on average life expectancy. People in their twenties today are predicted to have a State Pension Age of at least 68.

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 £8,546.20 a year (2018/19). According to recent research, a single person needs an annual income of just £17,000 to live comfortably in the UK*. Depending on your circumstances it may be the case that you need less money in later life when you remove the costs of commuting, or if you manage to repay your mortgage before retirement, for example.

Yet however much you reduce your outgoings by, it’s unlikely the State Pension will be enough to live off – even if you receive the maximum amount. It’s therefore crucial to save into a personal pension and/or a workplace pension well in advance of retirement so that you’ll have a decent income in later life.

You can still earn an income once you reach State Pension age, as you don’t have to stop working. If you decide to stay in employment, you can delay claiming your State Pension by a few years which could help you secure additional money when you choose to retire.

About PensionBee

PensionBee can help you combine all of your old pensions in one place. You can manage your retirement saving online, setting up regular contributions and making one-off payments quickly and easily through your personal dashboard. Join PensionBee now and take control of your pension saving.

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(* Source: Joseph Rowntree Foundation report)

Last edited: 18-09-2018

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