A guide to your state pension

Are you starting to plan for your retirement? If so then it’s great to have all the facts when it comes to your state pension.

Here we explain everything you need to know about your state pension, how much you’ll get, how to claim it and if it’s possible to boost your earnings.

Finder survey: Do you understand how pensions work?

What is the state pension?

The state pension is designed to pay you a wage in retirement. It’s a weekly payment that varies depending on how long you’ve worked and how much National Insurance (NI) you’ve paid.

Who is eligible for the state pension?

The state pension is available if:

• You’re over state pension age, currently 66 but gradually increasing to 68
• You have at least 10 years of National Insurance contributions

How many years of National Insurance do I need for a state pension?

You’ll normally need at least 10 years of National Insurance contributions (NICs) to get some state pension and 35 years to get the full state pension.

You can also get National Insurance credits if you’ve taken time out as a full-time carer or stay at home parent, or you’ve had periods of unemployment. National Insurance credits count as if you’d paid National Insurance for that year and boost your state pension entitlement.

How to pay National Insurance

NI is collected automatically by your employer through the PAYE system. If you’re self-employed you’ll need to pay NI yourself through the self-assessment system.

You can also choose to pay top-up, or voluntary NICs to plug any NI gaps in the last 6 years.

How much state pension payment do I get each week?

The full state pension is currently £221.20 per week, but you might receive less if you’ve got gaps in your NICs .

Can I use child benefit to boost the state pension?

If you claim child benefit for a child under 12 years old then you will automatically get a NI credit for every year you claimed child benefit. And NI credits count as if you’d paid NI that year, so it can boost your state pension.

It’s important to still claim child benefit even if your partner earns over £50,000 because it will increase your number of qualifying years for the state pension.

How is the state pension calculated?

The state pension is calculated based on your qualifying years – that means years when you’ve paid NICs or got a NI credit.

It’s calculated like this:

• Full pension of £221.20 divided by 35 = £6.32 (entitlement per qualifying year)
• £6.32 multiplied by your qualifying years

Here are some examples:

• Sasha worked and paid National Insurance for 40 years. She has over 35 years of National Insurance contributions so will get a full state pension.
• Andre was self-employed for 10 years; he took a 10-year career break and claimed child benefit; then he worked for another 15 years before retiring. He only contributed 25 years of National Insurance payments, but because he claimed child benefit he has 10 years of National Insurance credits. He can claim the full state pension.

What is a National Insurance credit?

National Insurance credits allow you to build up your state pension entitlement when you can’t work. You can get them if you claim certain benefits including:

• Child benefit for a child under 12
• Jobseeker’s allowance
• Carer’s allowance

What changed in April 2016?

In April 2016 the way state pensions are calculated changed, simplifying the system. There is now one full state pension instead of separate basic and additional state pensions.

If you retired before April 2016 then the amount you’ll get is based on the old rules. If you retire after April 2016 your state pension will be based on the new system (you may get slightly more if you’ve built up additional state pension entitlement under the old system).

Here’s a summary of the main changes:

When can I access state pension?

You’ll start getting state pension when you reach state pension age, which is currently 66 years old.

What is the current state pension age?

The current state pension age is 66 for both women and men. The state pension age is increasing to between 67 and 68 if you’re born after 5 April 1960.

Is the state pension taxed?

State pension is taxed in the same way as other income. You will still get a tax-free personal allowance (currently £12,570) and anything over this is taxed at 20%.

How do I claim the state pension?

You need to claim state pension as you won’t get it automatically. You will get a letter 2 months before you reach state pension age explaining what to do next.

You can claim your state pension online, by phoning up for a form or by printing out a form from the government website.

Can I claim the state pension early? If so, what’s the effect of doing that?

You can claim state pension up to 4 months before you reach state pension age but you won’t receive it until you reach state pension age.

What is a state pension forecast?

A state pension forecast sets out how much state pension you might get when you retire. You can apply for a forecast through the government website. You can also apply by printing off a form and posting it, or applying over the phone.

Here’s a summary of what the state pension forecast will show and what to do if there’s a mistake.

How can I boost my state pension?

If you don’t have 35 qualifying years, you may be able to boost your state pension by paying voluntary National Insurance contributions. It costs between £156 and £800 in National Insurance voluntary contributions to buy an extra qualifying year but you could get £267 extra per year in state pension. You need to act quickly as you can usually only pay voluntary contributions relating to the last 6 years.

You can also boost your state pension by deferring it. It can be a great deal because your pension will increase 1% for every 9 weeks you defer. The extra amount is paid once you apply for your state pension.

If you’re over state pension age and on a low income you may be able to apply for pension credit. Pension credit is means tested and currently boosts your income to £177.10 per week.

Bottom line

If you’ve worked for 35 years or more you will probably get the full state pension of £221.20 per week from the state pension age, which is currently 66. But watch out, because the state pension age is gradually increasing to 68.

It makes sense to get a state pension forecast to see where you stand. Then you can plan for retirement knowing how much state pension to expect.

Frequently asked questions

• Why did the state pension system change?

  Over the last few years the state pension system has changed to simplify the rules, equalise the rules between men and women and to increase the state pension age. The government made the changes because they couldn’t afford the pension bill: people are living and claiming state pension for longer.

• If I've got more than 35 qualifying NI years, will I get more than the full state pension?

  You won’t get any more state pension if you have more than 35 qualifying years.

• How does the state pension work if I'm self-employed?

  If you’re self-employed, your state pension is still based on your National Insurance contributions.

• Can I inherit my spouse's pension if they die?

  You might be able to inherit some of your partner’s pension if you were married before 6 April 2016, your partner died before 6 April 2016 and they hadn’t yet reached state pension age.

• What happens to my state pension if I'm transgender?

  If you’re transgender then you may be treated according to your acquired gender for state pension purposes, depending on certain conditions. Transgender women born on or before 6 November 1953 may be entitled to receive state pension earlier than men. This is because women this age received their pension earlier than men.

• Will my state pension payouts rise with inflation?

  State pension rises are decided each year by the government. The current government has pledged to raise the state pension by at least inflation, but this isn’t guaranteed and could change in the future.

• When I've claimed my state pension, when will I receive it?

  You’ll usually get your state pension within 5 weeks of reaching the state pension age.

• Does everyone get a state pension?

  Not everyone gets a state pension as it is based on your UK National Insurance contributions. You’ll need to have contributions of at least 10 years to receive a state pension.

• Do unmarried couples get separate state pensions?

  State pension is based on your individual National Insurance contributions so couples will get separate state pensions.

• How much is state pension for a couple?

  Full state pension for a couple is currently £442.40 (£221.20 x 2).

• Can the state pension be backdated?

  State pension can be backdated for up to 12 months from the time you reach state pension age. If you apply more than 12 months after you reach state pension age you’ll be treated as if you deferred your pension.

• Is the state pension different for women?

  The state pension rules have changed to equalise the rules between women and men. State pension age is now 66 for both women and men. State pension is now based entirely on your own contributions rather than contributions of a partner.

  Until 2018, women could claim state pension earlier than men. Older rules also allowed married women to claim an enhanced rate of state pension based on their partner’s National Insurance contributions.

• Can the state pension be claimed abroad?

  You can claim a UK state pension if you live abroad and you’ve paid enough UK National Insurance contributions.

Finder survey: Do you currently plan to spend all of your pension before you die?

To make sure you get accurate and helpful information, this guide has been edited by George Sweeney, DipFA as part of our fact-checking process.

Written by

Alice Guy

Writer

Alice Guy is a Suffolk-based finance writer, a busy mum of 4 older kids and a self-confessed personal finance geek. She trained as a chartered accountant with KPMG London before working for Tesco Plc as a business analyst. She loves to write about budgeting, saving, investing and building wealth. See full bio