{"id":430352,"date":"2022-01-06T16:52:24","date_gmt":"2022-01-06T16:52:24","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=430352"},"modified":"2026-01-30T03:58:13","modified_gmt":"2026-01-30T03:58:13","slug":"state-pension-vs-private-pension","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/pensions\/state-pension-vs-private-pension","title":{"rendered":"State pension vs private pension"},"content":{"rendered":"<p>Hoping to earn more in retirement than you\u2019ll get from the state pension, but not sure what your options are? One choice is to save into a private pension. <a href=\"https:\/\/www.finder.com\/uk\/pensions\/private-pension\">Private pensions<\/a> are completely separate from the state pension and benefit from generous government tax breaks. We outline the key differences between state and private pensions, and why it can be a good idea to have both.<\/p><style type=\"text\/css\">\n    .survey-response {\n        overflow-x: auto;\n        max-width: 800px;\n    }\n\n    .survey-response .luna-table th,\n    .survey-response .luna-table td {\n        padding: 0.3rem 1rem calc(0.20rem + 1px);\n        font-size: 12px;\n        color: rgb(117, 117, 117);\n        text-align: left;\n    }\n\n    .survey-response .luna-table {\n        border: none;\n    }\n\n    .survey-response .row-color-icon {\n        width: 10px;\n        height: 10px;\n        display: inline-block;\n        margin-right: 4px;\n        border-radius: 2px;\n    }\n\n    .survey-response .source-container {\n        top: -12px !important;\n        position: relative;\n    }\n\n    .survey-response .source {\n        color: rgb(108, 120, 129);\n        font-size: 11px;\n    }\n\n    .survey-response .source-link {\n        color: rgb(2, 113, 225);\n        font-size: 11px;\n        text-decoration: underline;\n    }\n\n    @media (min-width: 600px) {\n        .survey-response .border-fix {\n            border-radius: 12px;\n            border: 1px solid var(--light-divider-normal, #E5E7EB);\n            background: var(--light-background-main, #FFF);\n            padding: 0px\n        }\n    }\n\n    .survey-response .chart-container {\n        min-height: 250px;\n        border-radius: 12px;\n        border: 1px solid var(--light-divider-normal, #E5E7EB);\n        background: var(--light-background-main, #FFF);\n        padding: 15px;\n    }\n\n    .google-visualization-tooltip {\n        pointer-events: none;\n    }\n\n    @media screen and (min-width: 960px) {\n        .survey-response.u-grid {\n            margin-left: auto;\n            display: flex;\n            justify-content: space-between;\n            margin-right: auto;\n        }\n\n        .u-grid__col.chart-container {\n            margin-left: 0 !important;\n            margin-right: 0 !important;\n        }\n    }\n\n    .survey-response .table-container {\n        overflow-x: auto;\n        max-width: 800px;\n        display: block;\n    }\n\n    @media screen and (max-width: 959px) {\n        .survey-response .table-container {\n            display: block;\n        }\n\n        .source-container {\n            margin-left: 2rem;\n            margin-right: 2rem;\n        }\n    }\n\n<\/style><h4>Finder survey: Do you currently have a private pension?<\/h4><div id=\"scale-surveys-10011-4168\" class=\"survey-response u-grid u-grid--gutterLarge\"><div id=\"view---noslice-\" class=\"u-grid__col u-1\/2@s u-1\/1 aligncenter size-full chart-container\"><\/div><style>\n\t\t\t#scale-surveys-10011-4168 text,\n\t\t\t#scale-surveys-10011-4168 svg text,\n\t\t\t#view---noslice- text,\n\t\t\t#view---noslice- svg text {\n\t\t\t\tfont-family: 'Modern Era', sans-serif !important;\n\t\t\t}\n\t\t<\/style><script type=\"text\/javascript\">\n\t\t\t\t(function() {\n\n\t\t\t\t\tvar packageToLoad = 'corechart';\n\t\t\t\t\tvar eventName = 'GoogleChartsLoaded-' + packageToLoad;\n\t\t\t\t\tvar event = new Event(eventName);\n\n\t\t\t\t\tdocument.addEventListener(eventName, function() {\n\t\t\t\t\tconsole.log('called event!', eventName);\n\n\t\t\t\t\tfunction drawChart() {\n\t\t\t\t\t\tvar chartType = 'pie';\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tvar data = google.visualization.arrayToDataTable([\n\t\t\t\t\t\t\t['Response', ''],\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t['No', 58.82],\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t['Yes', 41.18],\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t]);\n\t\t\t\t\t\t\n\t\t\t\t\t\tvar options = {\n\t\t\t\t\t\t\tlegend: {\n\t\t\t\t\t\t\t\tposition: 'none'\n\t\t\t\t\t\t\t},\n\t\t\t\t\t\t\tcolors: ['#1D53FF', '#00B2FF', '#FFD23B', '#C3F53C', '#B469FF', '#FF73A9', '#1DD751', '#DB2420', '#E5F7FF', '#FFF9E5', '#EEF5DC', '#F2E5FF', '#FFE5EF']\n\t\t\t\t\t\t};\n\n\t\t\t\t\t\tvar chart;\n\t\t\t\t\t\t\t\t\t\t\t\tchart = new google.visualization.PieChart(document.getElementById('view---noslice-'));\n\t\t\t\t\t\t\/\/ Pie chart specific options can go here\n\t\t\t\t\t\toptions.chartArea = {width:'100%',height:'100%'};\n\t\t\t\t\t\t\n\t\t\t\t\t\tchart.draw(data, (chartType == 'pie') ? options : google.charts.Bar.convertOptions(options));\n\t\t\t\t\t}\n\t\t\t\t\t\tdrawChart();\n\t\t\t\t\t});\n\n\t\t\t\t\tfunction init() {\n\t\t\t\t\t\tconsole.log('calling init', eventName);\n\t\t\t\t\t\tif (typeof google !== 'undefined' && google.charts) {\n\t\t\t\t\t\t\tconsole.log('found charts', google, packageToLoad);\n\t\t\t\t\t\t\tgoogle.charts.load('current', {'packages':[packageToLoad]});\n\t\t\t\t\t\t\tgoogle.charts.setOnLoadCallback(function() {\n\t\t\t\t\t\t\t\tdocument.dispatchEvent(event);\n\t\t\t\t\t\t\t});\n\t\t\t\t\t\t} else {\n\t\t\t\t\t\t\tconsole.log('retrying');\n\t\t\t\t\t\t\tsetTimeout(init, 100);\n\t\t\t\t\t\t}\n\t\t\t\t\t}\n\t\t\t\t\tinit();\n\t\t\t\t})()\n\t\t\t<\/script><div class=\"u-grid__col u-1\/2@s  u-1\/1 aligncenter size-full border-fix table-container\"><table class=\"luna-table js-tablesorter tablesorter tablesorter-default\" role=\"grid\"><thead class=\"luna-table__header\"><tr><th>Response<\/th><th><\/th><\/tr><\/thead><tbody class=\"luna-table__body\" aria-live=\"polite\" aria-relevant=\"all\"><tr><td><span class=\"row-color-icon\" style=\"background-color: #1D53FF;\"><\/span> No<\/td><td>58.82%<\/td><\/tr><tr><td><span class=\"row-color-icon\" style=\"background-color: #00B2FF;\"><\/span> Yes<\/td><td>41.18%<\/td><\/tr><\/tbody><\/table><\/div><div class=\"u-grid__col u-1\/1 source-container\"><span class=\"source\">Source: Finder survey by Censuswide of  Brits, December 2023<\/span><\/div><\/div><h3>What is the state pension?<\/h3><p>This government-backed pension scheme gives you a weekly pension income when you reach state pension age. This is currently 66, but it\u2019s due to rise to 67 between 2026 and 2028. It\u2019s provisionally due to rise again to age 68 between 2037 and 2039, but this hasn\u2019t been confirmed. You can check your state pension age based on your specific birth date using the government\u2019s <a href=\"https:\/\/www.gov.uk\/state-pension-age\" target=\"_blank\" rel=\"noopener\">state pension calculator<\/a>. The income you eventually receive depends on a number of things, including when you joined the scheme and your National Insurance contribution record.<\/p><h4>Who can have the state pension?<\/h4><p>There are 2 forms of state pension: the \u201cold rules\u201d state pension, which those reaching state pension age before 6 April 2016 receive. And the \u201cnew\u201d state pension, which anyone reaching state pension age since then will receive. As most people eligible for the old state pension will already be receiving it, this guide focuses on the new state pension. You can find out more about the 2016 changes in our <a href=\"https:\/\/www.finder.com\/uk\/pensions\/state-pension\">full state pension guide<\/a>.<\/p><p>You can\u2019t make direct financial contributions towards the state pension. Instead, to be eligible for the new state pension you need at least 10 qualifying years on your National Insurance record. You accumulate qualifying years through one of the following:<\/p><ul><li>Working and paying National Insurance contributions<\/li><li>Getting National Insurance credits, such as if you are unemployed, or a parent or carer<\/li><li>Paying voluntary National Insurance contributions<\/li><\/ul><p>To qualify for the maximum amount of the new state pension, you need 35 qualifying years.<\/p><h4>How much is the state pension worth?<\/h4><p>The amount you\u2019ll receive in income depends on your number of qualifying National Insurance years. As of the 2021\/2022 tax year, you\u2019ll get:<\/p><ul><li>\u00a3179.60 a week (\u00a39,339.20 a year) if you have 35 or more qualifying years<\/li><li>\u00a351.31 a week (\u00a32,668.12 a year) if you have the minimum 10 qualifying years<\/li><\/ul><p>If you have between 10 and 35 qualifying years, you\u2019ll receive a pro-rata income. If you have less than 10 qualifying years, you won\u2019t receive the state pension. If you\u2019re worried that gaps in your National Insurance record will affect your qualification, you can usually make voluntary contributions to plug the gaps.<\/p><h3>What is a private pension?<\/h3><p>A <a href=\"https:\/\/www.finder.com\/uk\/pensions\/private-pension\">private pension<\/a> (also known as a personal pension) is set up on your own (as opposed to workplace pensions, which are set up by your employer). You pay money into the scheme either regularly or on an ad hoc basis and these funds are invested. It\u2019s completely separate from your state pension. If you don\u2019t have a workplace pension or want to contribute more towards your pension than your workplace scheme allows, you can set up a private pension on top of the state pension to give you a little more on your retirement.<\/p><h4>Who can have a private pension?<\/h4><p>Anyone can. There are no eligibility criteria attached to having or benefiting from a private pension. You can even take out a private pension on behalf of a child. All you need are funds to pay in (some private pension schemes require minimum contributions) and the time and will to research providers and open the scheme. Some private pensions known as <a href=\"https:\/\/www.finder.com\/uk\/pensions\/self-invested-personal-pensions\">self-invested personal pensions<\/a> (SIPP) also require you to actively manage the investments that hold your pension funds.<\/p><h4>How much is a private pension worth?<\/h4><p>Unlike the state pension, which guarantees a certain regular income depending on your National Insurance record, it\u2019s not possible to put a general figure on how much private pensions are worth. That\u2019s because the value of a private pension when you retire is entirely dependent on the following:<\/p><ul><li>How much you pay in and over what period<\/li><li>The performance of the investments your money is placed in<\/li><li>The charges you pay for administration and management of the scheme<\/li><\/ul><p>These factors will all influence how much you have in your private pension \u201cpot\u201d when you retire. Higher contributions, lower charges and strong investment performance will result in a bigger pot than the opposites.<\/p><h3 id=\"learn\">What are the main differences between the state pension and a private pension?<\/h3><table class=\"luna-table luna-table--responsiveList luna-table--fixedColumns has-margin-bottom\"><thead class=\"luna-table__header\"><tr><th><\/th><th>State pension<\/th><th>Private pensions<\/th><\/tr><\/thead><tbody class=\"luna-table__body\"><tr><th scope=\"row\">Who is eligible?<\/th><td>Anyone with at least 10 qualifying years on their National Insurance record<\/td><td>Anyone \u2013 there are no eligibility criteria to open a private pension, though some schemes require minimum contributions<\/td><\/tr><tr><th scope=\"row\">Who provides the scheme?<\/th><td>The UK government<\/td><td>A private pension provider that you choose<\/td><\/tr><tr><th scope=\"row\">How do you contribute?<\/th><td>By making National Insurance contributions or building up National Insurance credits<\/td><td>By paying in regular amounts, lump sums or a combination<\/td><\/tr><tr><th scope=\"row\">How much do you get?<\/th><td>The new state pension gives you a maximum income of \u00a39,339.20 a year<\/td><td>Pot value when you retire depends on contributions and investment performance<\/td><\/tr><tr><th scope=\"row\">How do you receive your pension?<\/th><td>As a regular weekly income into your bank or building society account<\/td><td>You decide whether you use your pot to buy an income, or leave it invested to draw it out as needed<\/td><\/tr><tr><th scope=\"row\">Find out more<\/th><td><a href=\"https:\/\/www.finder.com\/uk\/pensions\/state-pension\">Simple guide to your state pension<\/a><\/td><td><a href=\"https:\/\/www.finder.com\/uk\/pensions\/private-pension\">Best private pensions<\/a><\/td><\/tr><\/tbody><\/table><h3>How do I join the state pension?<\/h3><p>You don\u2019t need to do anything to actively join the state pension. As soon as you start making National Insurance contributions, your qualifying years will start totting up. Once you have 10 years on your National Insurance record, you automatically qualify to receive state pension payments once you reach state pension age.<\/p><h3>How do I join a private pension?<\/h3><p>To set up a private pension, you can either research and choose a provider and set your pension up yourself or ask a regulated financial adviser to recommend a provider for your specific needs (there will be a fee for this service). <a href=\"https:\/\/www.finder.com\/uk\/pensions\/private-pension\">Our guide on private pensions<\/a> has tips on what to look out for when selecting a scheme provider.<\/p><h3>Which type of pension is easier to manage?<\/h3><p>A state pension usually doesn\u2019t require any management at all. It is set up by default as long as you meet the eligibility criteria, and you reap the eventual benefits in the form of regular income. The only thing you need to do is keep an eye on how your National Insurance record is getting on and, if you wish, make additional voluntary contributions to plug any gaps. You can check your likely state pension entitlement and find out how to increase it by getting a <a href=\"https:\/\/www.gov.uk\/check-state-pension\" target=\"_blank\" rel=\"noopener\">state pension forecast<\/a>.<\/p><p>So, by default, a private pension involves a bit more effort on your part. With standard personal pensions, the provider will manage the day-to-day running of the account and where your money is invested, so it won\u2019t be too much hassle in the long run. But at the very least you\u2019ll need to do upfront research to choose a provider, decide on a broad investment approach and keep an occasional eye on the performance of your pension investments. This will include looking out for any increases in pension charges as these can eat into the value of your account.<\/p><p>If you opt for a <a href=\"https:\/\/www.finder.com\/uk\/pensions\/self-invested-personal-pensions\">self-invested personal pension<\/a>, unless you employ someone to do it for you, you\u2019ll be in charge of managing the account, including picking investments and making trades. Some people may prefer this level of control, but a SIPP will inevitably take more time and effort to manage.<\/p><p>Regardless of what type of pension you opt for, the effort will seem worth it if (as you\u2019d expect over several decades) your investments grow in value and provide a welcome boost to your pension funds.<\/p><h3>Do I pay income tax on my state pension or private pension contributions?<\/h3><p>Your state pension eligibility is related to your National Insurance contributions (which are made from your gross earnings, before tax), so income tax is a moot point.<\/p><p>And while it is likely you will have paid income tax on contributions you make to a private pension, you will then benefit from government tax relief on those contributions. This means that the pension provider will claim back basic-rate (20%) tax from the government and add it to each contribution you make to your private pension. If you\u2019re a higher-rate taxpayer, you can claim back the extra via a tax return or <a href=\"https:\/\/www.gov.uk\/claim-tax-refund\" target=\"_blank\" rel=\"noopener\">directly from Her Majesty\u2019s Revenue and Customs<\/a> (HMRC).<\/p><div class=\"eeQuote box u-rounded--lg source-finder type-expert\">\n    <div class=\"eeQuote__gridContainer\">\n        <div class=\"eeQuote__photoContainer\">\n            <div class=\"eeQuote__startQuoteIcon\">\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"40\" height=\"36\" viewbox=\"0 0 32 28\" fill=\"none\">\n  <path d=\"M13.1114 3.54845C12.05 5.01898 11.1447 6.64935 10.3955 8.43956C9.64624 10.2298 9.24041 11.8282 9.17798 13.2348C10.7389 13.8102 11.9563 14.6733 12.8304 15.8242C13.767 16.975 14.2352 18.3816 14.2352 20.044C14.2352 22.0899 13.5484 23.8482 12.1749 25.3187C10.8637 26.7253 9.2092 27.4286 7.21127 27.4286C5.15091 27.4286 3.43394 26.7253 2.06036 25.3187C0.686788 23.9121 0 21.8661 0 19.1808C0 16.3037 0.749223 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6.3158H15.3179ZM3.63088 12.0032V6.94983H8.68421C11.4695 6.94983 13.7375 9.21784 13.7375 12.0032C13.7375 14.7885 11.4695 17.0565 8.68421 17.0565C5.89888 17.0565 3.63088 14.7885 3.63088 12.0032ZM15.3179 17.0565C14.3022 17.0565 13.3401 16.76 12.5073 16.1985C13.6492 15.1576 14.3716 13.6655 14.3716 12C14.3716 9.79824 13.113 7.88984 11.2771 6.94667H15.3179C18.1032 6.94667 20.3712 9.21468 20.3712 12C20.3712 14.7853 18.1032 17.0533 15.3179 17.0533V17.0565Z\" fill=\"#232320\"><\/path>\n        <path d=\"M10.9808 8.88653C10.5992 8.88653 10.2427 9.03163 9.93043 9.28083C10.1859 9.47956 10.3563 9.78553 10.3563 10.1357C10.3563 10.735 9.8705 11.2208 9.27117 11.2208C9.14184 11.2208 9.02197 11.1955 8.90526 11.1545C8.85163 11.4227 8.82324 11.7066 8.82324 11.9999C8.82324 13.7191 9.78849 15.1165 10.9808 15.1165C12.1732 15.1165 13.1384 13.7222 13.1384 11.9999C13.1384 10.2776 12.1732 8.88338 10.9808 8.88338V8.88653Z\" fill=\"#232320\"><\/path>\n      <\/g>\n      <defs>\n        <clippath id=\"clip0_5290_9827\">\n          <rect width=\"18\" height=\"11.3684\" fill=\"white\" transform=\"translate(3 6.3158)\"><\/rect>\n        <\/clippath>\n      <\/defs>\n    <\/svg>\n  <\/div>\n<\/div>\n                                    <\/div>\n\n        <div class=\"eeQuote__contentContainer \">\n            <div class=\"eeQuote__content\">\n                                    <div class=\"eeQuote__heading\">Our expert says: Which type of pension will be worth more when I retire?<\/div>\n                                <div class=\"eeQuote__quote\">\n                    <p>\"Your state pension has a fixed value, subject to the number of qualifying years on your National Insurance record. A private pension may be worth more or less than this, depending on how much you\u2019ve paid in by the time you retire and the performance of your investments.<\/p><p>If you only have a small private pot when you retire (\u00a310,000, say), that\u2019s very unlikely to be worth more to you than the state pension, unless you have a very short life expectancy.<\/p><p>If, on the other hand, you have a \u00a3250,000 pot, there\u2019s a reasonable chance this will be worth more over your lifetime than your state pension.<\/p><p>Let\u2019s say you start withdrawing both pensions at age 66 (the current state pension age) and survive for another 25 years. By the time you die, you\u2019ll have received at least \u00a3233,480 (25 x \u00a39,339.30) from the state pension. In practice, it will be more than this, because the state pension increases each year by at least 2.5%, in accordance with the <a href=\"https:\/\/www.finder.com\/uk\/pensions\/what-is-the-triple-lock-on-pensions\">triple lock<\/a> rules.<\/p><p>And let\u2019s say you take the same amount (\u00a39,339.30) out of your private pension pot each year through <a href=\"https:\/\/www.finder.com\/uk\/pensions\/best-pension-drawdown\">pension drawdown<\/a>. On paper, after 25 years, you\u2019ll have a bit over \u00a316,000 in your pot that you can leave to your beneficiaries. But again, it\u2019s not quite that simple. On the downside, pension charges will eat into the value of your pension pot. But on the upside, most of your money will be left invested, initially at least. And invested money has the chance to grow. There\u2019s a decent (though not guaranteed) chance that investment growth will outweigh the triple-lock increases of your state pension.<\/p><p>So, in answer to the question of which type of pension will be worth more, the answer is, as is often the case: it depends.\"<\/p>\n\n                <\/div>\n            <\/div>\n\n                            <div class=\"eeQuote__authorInfo\">\n                                            <div class=\"eeQuote__authorPhoto--mobile\">\n                            <figure class=\"eeQuote__photo\">\n                                <img decoding=\"async\" alt=\"Zoe Stabler DipFA's headshot\" src=\"https:\/\/www.finder.com\/finder-us\/wp-uploads\/2025\/11\/ZoeStablerF1_Finder_600x600.png\" class=\"avatar avatar-200 photo finder-avatar\" height=\"200\" width=\"200\" srcset=\"https:\/\/www.finder.com\/finder-us\/wp-uploads\/2025\/11\/ZoeStablerF1_Finder_600x600.png?fit=180 180w, https:\/\/www.finder.com\/finder-us\/wp-uploads\/2025\/11\/ZoeStablerF1_Finder_600x600.png?fit=360 360w, https:\/\/www.finder.com\/finder-us\/wp-uploads\/2025\/11\/ZoeStablerF1_Finder_600x600.png?fit=600 600w\" sizes=\"(max-width: 600px) 100vw, 600px\" loading=\"lazy\">\n                            <\/figure>\n                                                            <div class=\"eeQuote__finderLozenge\">\n  <div class=\"eeQuote__finderLozenge--desktop\">\n    <svg width=\"19\" height=\"12\" viewbox=\"0 0 19 12\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n      <path d=\"M13.0023 0.332947H0.333008V5.99998C0.333008 9.12984 2.87019 11.667 6.00004 11.667C7.32857 11.667 8.55054 11.2075 9.51614 10.4384L9.55942 10.505C10.5117 11.2342 11.707 11.667 12.9989 11.667C16.1288 11.667 18.666 9.12984 18.666 5.99998C18.666 2.87013 16.1288 0.332947 12.9989 0.332947H13.0023Z\" fill=\"white\"><\/path>\n      <path d=\"M15.4225 2.71353C15.0196 2.71353 14.6434 2.8667 14.3137 3.12974C14.5834 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13.7375 9.21784 13.7375 12.0032C13.7375 14.7885 11.4695 17.0565 8.68421 17.0565C5.89888 17.0565 3.63088 14.7885 3.63088 12.0032ZM15.3179 17.0565C14.3022 17.0565 13.3401 16.76 12.5073 16.1985C13.6492 15.1576 14.3716 13.6655 14.3716 12C14.3716 9.79824 13.113 7.88984 11.2771 6.94667H15.3179C18.1032 6.94667 20.3712 9.21468 20.3712 12C20.3712 14.7853 18.1032 17.0533 15.3179 17.0533V17.0565Z\" fill=\"#232320\"><\/path>\n        <path d=\"M10.9808 8.88653C10.5992 8.88653 10.2427 9.03163 9.93043 9.28083C10.1859 9.47956 10.3563 9.78553 10.3563 10.1357C10.3563 10.735 9.8705 11.2208 9.27117 11.2208C9.14184 11.2208 9.02197 11.1955 8.90526 11.1545C8.85163 11.4227 8.82324 11.7066 8.82324 11.9999C8.82324 13.7191 9.78849 15.1165 10.9808 15.1165C12.1732 15.1165 13.1384 13.7222 13.1384 11.9999C13.1384 10.2776 12.1732 8.88338 10.9808 8.88338V8.88653Z\" fill=\"#232320\"><\/path>\n      <\/g>\n      <defs>\n        <clippath id=\"clip0_5290_9827\">\n          <rect width=\"18\" height=\"11.3684\" fill=\"white\" transform=\"translate(3 6.3158)\"><\/rect>\n        <\/clippath>\n      <\/defs>\n    <\/svg>\n  <\/div>\n<\/div>\n                                                    <\/div>\n                                        <div class=\"eeQuote__authorDetails\">\n                                                    <a class=\"eeQuote__authorName\" href=\"https:\/\/www.finder.com\/uk\/author\/zoestabler\" itemprop=\"url\" target=\"_blank\">\n                                Zoe Stabler DipFA\n                            <\/a>\n                                                                            <div class=\"eeQuote__authorTitle\">Senior writer<\/div>\n                                            <\/div>\n                <\/div>\n                    <\/div>\n    <\/div>\n<\/div>\n<h3>How can I withdraw money from a state pension vs private pension?<\/h3><p>You receive your state pension as a fixed weekly income that is guaranteed for life from the time you reach state pension age. You won\u2019t start receiving it automatically. Instead you need to <a href=\"https:\/\/www.gov.uk\/new-state-pension\/how-to-claim\" target=\"_blank\" rel=\"noopener\">apply online<\/a> to start receiving it.<\/p><p>How you withdraw money from a private pension is a tad more complicated. You not only need to decide when you want to start accessing your funds (you can do so any time from the age of 55, though this may be increasing to 57 from 2028). You also need to decide how you want to access the money.<\/p><p>All private pension schemes are defined contribution schemes. Options for accessing the money in these schemes includes taking a 25% tax-free lump sum, buying an annuity or opting for pension income drawdown. You can read more about these choices in <a href=\"https:\/\/www.finder.com\/uk\/pensions\/defined-contribution-pension-schemes\">our guide to defined contribution pensions<\/a>.<\/p><h3>Do I pay income tax on my state pension or private pension income?<\/h3><p>Other than the 25% tax-free lump sum that you can take from your combined workplace and private pensions, all other pension income is taxable at your marginal rate.<\/p><p>In practice, if your only retirement income is from the state pension, you usually won\u2019t pay any income tax on it. That\u2019s because (as of the 2021\/2022 tax year) the maximum state pension entitlement (\u00a39,339.20 a year) is lower than the standard tax-free personal allowance on income (\u00a312,570).<\/p><p>However, you\u2019ll need to pay income tax on any earnings above the tax-free allowance. So if income from a private or workplace pension pushes your income above this limit, you\u2019ll pay tax on it. It\u2019ll be at a rate of 20% on anything between \u00a312,570 and \u00a350,270, and 40% on income above this (up to \u00a3125,140).<\/p><h3>Who is likely to benefit more from the state pension?<\/h3><p>It\u2019s arguable that everyone who receives it benefits from the state pension. However, you\u2019re likely to feel the benefit more if your ability to pay into a workplace or private pension has been limited over your lifetime, as your state pension will make up a bigger proportion of your total pension pot. And, of course, those who have built up at least 35 years on their National Insurance record will receive the highest level of state pension income.<\/p><h3>Who is likely to benefit more from a private pension?<\/h3><p>You\u2019re likely to benefit most from a private pension if you\u2019ve had the financial means to build up pension savings in addition to the state pension, but haven\u2019t had access to a workplace pension. This might be because you have been self-employed, have worked abroad or have taken time out of work to raise a family or for another reason. For people in these or similar circumstances, a private pension is a good way to save for retirement. That\u2019s thanks to the tax relief available on contributions.<\/p><h3>What are the advantages and disadvantages of the state pension?<\/h3><div class=\"u-grid\"><div class=\"u-grid__col u-1\/2@s\"><h4>Advantages<\/h4><ul class=\"list-4\"><li>If you make enough National Insurance contributions, you\u2019re guaranteed a fixed income for life<\/li><li>Your pension income will increase each year in line with the <a href=\"https:\/\/www.finder.com\/uk\/pensions\/what-is-the-triple-lock-on-pensions\">state pension triple lock<\/a><\/li><\/ul><\/div><div class=\"u-grid__col u-1\/2@s\"><h4>Disadvantages<\/h4><ul class=\"list-13\"><li>State income is capped at a certain amount that may not be enough for most people to live comfortably<\/li><li>If you have less than 10 qualifying years on your National Insurance record, you get zip<\/li><\/ul><\/div><\/div><h3>What are the advantages and disadvantages of private pensions?<\/h3><div class=\"u-grid\"><div class=\"u-grid__col u-1\/2@s\"><h4>Advantages<\/h4><ul class=\"list-4\"><li><a href=\"https:\/\/www.finder.com\/uk\/pensions\/are-pension-contributions-taxable\">Tax relief<\/a> applies to private pension contributions<\/li><li>Potential to boost your pension income by a significant, uncapped amount (though tax relief on contributions is capped at fairly high levels)<\/li><li>Flexibility over how you contribute to your pension and how you withdraw the funds<\/li><\/ul><\/div><div class=\"u-grid__col u-1\/2@s\"><h4>Disadvantages<\/h4><ul class=\"list-13\"><li>The money you contribute to a private pension scheme will reduce your disposable income<\/li><li>Funds held in private pension schemes are subject to investment risk; investment value can fall as well as rise<\/li><li>Private pensions require more admin than the state pension and active investment management if you have a <a href=\"https:\/\/www.finder.com\/uk\/pensions\/self-invested-personal-pensions\">SIPP<\/a><\/li><\/ul><\/div><\/div><h3>Bottom line<\/h3><p>The state pension and private pensions are very different beasts that can help fund your retirement in different ways. Fortunately, though, it\u2019s not a case of one or the other. For those that don\u2019t have access to a workplace pension, a private pension can complement the state pension, boosting your chances of an enjoyable retirement.<\/p><h3 id=\"faqs\">Frequently asked questions<\/h3><ul class=\"luna-accordionGroup accordionGroup\"><li class=\"luna-accordion\" data-accordion=\"accordion\">\n  <div class=\"luna-accordion__summary\">\n    <h4 class=\"luna-accordion__heading\">\n      <button class=\"luna-accordion__action collapsed\" aria-expanded=\"false\" aria-controls=\"accordion0000000000\" data-toggle=\"collapse\" data-target=\"#accordion0000000000\">\n        <span class=\"luna-accordion__title\">Can I transfer from the state pension to a private pension and vice versa?<\/span>\n        <svg class=\"luna-icon\" aria-hidden=\"true\">\n          <use xlink:href=\"#chevron-down\" data-accordion-icon=\"show\"><\/use>\n          <use xlink:href=\"#chevron-up\" data-accordion-icon=\"hide\" class=\"is-hidden\"><\/use>\n        <\/svg>\n      <\/button>\n    <\/h4>\n  <\/div>\n  <div class=\"luna-accordion__details collapse\" aria-hidden=\"true\" id=\"accordion0000000000\" data-accordion=\"details\">\n    <div class=\"accordionContent\"><p>No. You can <a href=\"https:\/\/www.finder.com\/uk\/pensions\/finding-transferring-and-combining-your-pensions\">transfer one private pension to another<\/a>, but you can\u2019t transfer any funds to or from the state pension.<\/p><\/div>\n  <\/div>\n<\/li><li class=\"luna-accordion\" data-accordion=\"accordion\">\n  <div class=\"luna-accordion__summary\">\n    <h4 class=\"luna-accordion__heading\">\n      <button class=\"luna-accordion__action collapsed\" aria-expanded=\"false\" aria-controls=\"accordion0000000001\" data-toggle=\"collapse\" data-target=\"#accordion0000000001\">\n        <span class=\"luna-accordion__title\">Is a private pension better than a state pension?<\/span>\n        <svg class=\"luna-icon\" aria-hidden=\"true\">\n          <use xlink:href=\"#chevron-down\" data-accordion-icon=\"show\"><\/use>\n          <use xlink:href=\"#chevron-up\" data-accordion-icon=\"hide\" class=\"is-hidden\"><\/use>\n        <\/svg>\n      <\/button>\n    <\/h4>\n  <\/div>\n  <div class=\"luna-accordion__details collapse\" aria-hidden=\"true\" id=\"accordion0000000001\" data-accordion=\"details\">\n    <div class=\"accordionContent\"><p>Neither type of pension is better or worse. They simply serve different purposes. If the state pension provides a solid foundation of most people\u2019s retirement plans, a private pension can give you the ability build a comfortable (metaphorical) home on that foundation.<\/p><\/div>\n  <\/div>\n<\/li><li class=\"luna-accordion\" data-accordion=\"accordion\">\n  <div class=\"luna-accordion__summary\">\n    <h4 class=\"luna-accordion__heading\">\n      <button class=\"luna-accordion__action collapsed\" aria-expanded=\"false\" aria-controls=\"accordion0000000002\" data-toggle=\"collapse\" data-target=\"#accordion0000000002\">\n        <span class=\"luna-accordion__title\">Does your state pension reduce if you have a private pension?<\/span>\n        <svg class=\"luna-icon\" aria-hidden=\"true\">\n          <use xlink:href=\"#chevron-down\" data-accordion-icon=\"show\"><\/use>\n          <use xlink:href=\"#chevron-up\" data-accordion-icon=\"hide\" class=\"is-hidden\"><\/use>\n        <\/svg>\n      <\/button>\n    <\/h4>\n  <\/div>\n  <div class=\"luna-accordion__details collapse\" aria-hidden=\"true\" id=\"accordion0000000002\" data-accordion=\"details\">\n    <div class=\"accordionContent\"><p>No. The state pension and any private pension are entirely separate. One cannot affect the other.<\/p><\/div>\n  <\/div>\n<\/li><li class=\"luna-accordion\" data-accordion=\"accordion\">\n  <div class=\"luna-accordion__summary\">\n    <h4 class=\"luna-accordion__heading\">\n      <button class=\"luna-accordion__action collapsed\" aria-expanded=\"false\" aria-controls=\"accordion0000000003\" data-toggle=\"collapse\" data-target=\"#accordion0000000003\">\n        <span class=\"luna-accordion__title\">Are there any other types of pension?<\/span>\n        <svg class=\"luna-icon\" aria-hidden=\"true\">\n          <use xlink:href=\"#chevron-down\" data-accordion-icon=\"show\"><\/use>\n          <use xlink:href=\"#chevron-up\" data-accordion-icon=\"hide\" class=\"is-hidden\"><\/use>\n        <\/svg>\n      <\/button>\n    <\/h4>\n  <\/div>\n  <div class=\"luna-accordion__details collapse\" aria-hidden=\"true\" id=\"accordion0000000003\" data-accordion=\"details\">\n    <div class=\"accordionContent\"><p>The main other type of pension you\u2019ll encounter is a workplace pension. This third type of pension is independent of both the state pension and any private pension. You can have all 3 if you wish. That said, if you have to choose between either paying into a workplace pension or paying into a private pension, you\u2019re usually best off filling up your workplace pension first. That\u2019s because your employer also has to make contributions to a workplace pension. You won\u2019t get these if you prioritise paying into a private pension.<\/p><\/div>\n  <\/div>\n<\/li><\/ul><div id=\"sources\" style=\"position: relative;\"><h3 style=\"position: absolute; width: 1px; height: 1px; padding: 0; margin: -1px; overflow: hidden; clip: rect(0,0,0,0); white-space: nowrap; border: 0;\">Sources<\/h3>\n<div id=\"lazy0000000000\"><\/div>\n<script type=\"application\/json\" id=\"lazyloaded-assets-json-lazy0000000000\" class=\"lazyloaded-assets-json\">{\"critical-scripts\":[],\"scripts\":[\"https:\\\/\\\/www.finder.com\\\/parent-theme\\\/shortcodes\\\/article-source\\\/prod\\\/article-source.de087a0da9824e407767.js\"],\"styles\":[\"https:\\\/\\\/www.finder.com\\\/parent-theme\\\/shortcodes\\\/article-source\\\/prod\\\/article-source.87684078d471e76125dd.css\"]}<\/script><\/div><article class=\"luna-card luna-card--alt\"><div class=\"luna-card__block has-padding-small\">Pensions are long-term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply. Keep in mind that the tax treatment of your pension and investments will depend on your individual circumstances and may change in the future. Capital at risk.<\/div><\/article><article class=\"luna-card luna-card--alt\"><div class=\"luna-card__block has-padding-small\">We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms \"best\", \"top\", \"cheap\" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our <a href=\"https:\/\/www.finder.com\/uk\/terms-of-use\" class=\"fin-text-navy\">terms of use<\/a>. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables is provided by Defaqto. In other cases, Finder has sourced data directly from providers.<\/div><\/article>","protected":false},"excerpt":{"rendered":"<p>The state pension and private pensions are separate but complementary ways to save for retirement.<\/p>\n","protected":false},"author":805,"featured_media":431165,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_cover_media_provider":"image","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_cover_video_id":0,"apple_news_cover_video_url":"","apple_news_cover_embedwebvideo_url":"","apple_news_is_hidden":"","apple_news_is_paid":"","apple_news_is_preview":"","apple_news_is_sponsored":"","apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":[],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":""},"categories":[2651],"tags":[],"asset_tag":[],"class_list":["post-430352","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pensions"],"apple_news_notices":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.9 (Yoast SEO v24.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>State pension vs private pension | Key differences explained<\/title>\n<meta name=\"description\" content=\"The state pension and private pensions are separate but complementary ways to save for retirement. 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