State Pension

Approaching retirement makes people think about their State Pension and how it will support them in later life. Your State Pension is an important part of your retirement fund, but what is the new State Pension?

The State Pension is a payment every four weeks from the government that you receive when you reach State Pension age. The full New State Pension is currently £179.60 per week.

Here you’ll find the latest guidance on state pensionState Pension and how it relates to you right now.

 

What is the State Pension age?

When you reach State Pension age, you can claim the State Pension. From April 2021, it’s 66 for men and women. The table below shows when you become entitled to a State Pension based on your date of birth. FOr further reading, here is a full article showing when you can retire based on the year you were born.

Date of Birth	Date you reach State Pension age
Before 6 October 1954	You’ve already reached State Pension age
6 October 1954 to 5 April 1960	66th birthday

Source: https://www.gov.uk/state-pension-age

What are my current State Pension rates?

The full weekly rate for new State Pension is:

Annual Income	Pension Income
New State Pension	£179.60
Simple – You know exactly how much you’re going to get from day one.	Rigid – Your pot has no chance to grow as it has no investment value.
The full weekly rates for the old State Pension are:
Category A pension	£137.60
Category B pension based on spouse’s or civil partner National Insurance contributions	£137.60
Category B pension based on spouse’s or civil partner National Insurance contributions	£82.45
Category D non-contributory pension	£82.45

How do I calculate my State Pension entitlement?

Your State Pension entitlement is calculated based on your National Insurance (NI) record and the number of years of qualifying NI contributions/credits you have made/received. 

For NI contributions/credits from before 6 April 2016, your pre-2016 record is used to calculate a ‘starting amount.’ You may get more or less than the full weekly amount, depending on your NI record. Your starting amount is the higher of the two amounts you would have received:

• Based on your own NI contributions under old State Pension rules (including basic and additional pension elements), or
• If the new State Pension was in place at the start of your working life.

A deduction is made from both calculations to work out the starting amount if you were in a contracted-out personal or workplace pension scheme before 2016, for example, as a member of a public-sector pension. In this case, you paid lower NI contributions because you paid into a contracted-out pension, or some of your NI contributions were paid towards your private pension instead of additional State Pension.

What is my State Pension forecast?

To see your estimated starting amount, request a State Pension forecast. This estimates how much your State Pension will be, based on your current NI record. It includes:

• The date you reach State Pension age
• An estimate of State Pension based on your NI record to date
• The number of qualifying years you currently have.

Anyone over 18 can get an estimate from www.gov.uk/check-state- pension.

If the estimate shows you have insufficient qualifying years to get a full State Pension, ask if you can make-up the shortfall before reaching the State Pension age.

If not, ask HMRC for a NI statement, check this and query any gaps. Consider paying voluntary NI contributions to make up for the gaps.

If the starting amount is less than the full amount?

You may be able to receive a higher rate of State Pension by adding more qualifying years to your NI record until you reach the full amount or you reach State Pension age, whichever is first. Each qualifying year on your NI record adds 1/35th of the full amount (about £5.13 a week) to your new State Pension entitlement. See section 12 for how to increase your NI record.

E.g. if your starting amount from your pre-April 2016 NI record is £120.00 a week. You add five qualifying years to your NI record before reaching State Pension age (each adding £5.13), equalling £25.65 a week. You are paid £145.65 a week State Pension when you claim.

If the starting amount is more than the full amount?

If your starting amount is more than the full State Pension amount, the extra amount is called your ‘protected payment.’ This is paid on top of your new State Pension when you claim and increases each year in line with inflation. If you are already over the full new State Pension amount, any qualifying years added to your NI record before reaching State Pension age do not add anything to the amount of your State Pension.

If I’ve made no NI contributions/credits prior to 6 April 2016?

Your State Pension is calculated entirely under new State Pension rules. You must have at least ten qualifying years on your NI record to get new State Pension (there are exceptions – see section 8 about increasing or inheriting pension from a spouse or civil partner). Your new State Pension is more likely to be calculated in this way if you were born after the year 2000 or became a resident of the UK after 2015

You don’t have to choose one or the other. It’s possible to combine a box and a barrel approach. For example, splitting your pension pot equally between the two, giving you a balance of regular income alongside flexible access to larger sums if needed.

You should always seek financial advice before making a final decision.

Is an annuity better than a lump sum?

A lump sum is when you withdraw a specific amount of money from your pension pot in one go.

An annuity pension is different to a tax-free lump sum. You might use your annuity income to cover your foundation costs, things like your mortgage and insurances. This post explains exactly what an annuity pension is.

Taking a lump sum gives you the option to make one-off large purchases or go on holidays that you normally couldn’t afford. It’s always worth speaking to an independent financial adviser to find out what’s best for you and your circumstances.

To find out more about lump sum’s check out: Is my pension lump sum taxable?

When you buy an annuity, the provider will tell you that you have a 30-day cooling-off period. You can change your mind at this time and tell the annuity provider, usually in writing, that you don’t want to go ahead.

That’s not the same as cashing in your annuity. If you’ve passed your cooling off period it’s highly unlikely that you’ll be able to cash in.

How does National Insurance (NI) affect my State Pension?

Your New State Pension is based on your NI record which is made up of any combination of:

• NI contributions paid while working as an employee or self-employed
• NI contributions paid voluntarily
• NI credits awarded while receiving certain benefits
• NI credits and/or Home Responsibilities Protection awarded due to caring responsibilities.

You’ll need 35 qualifying years to get the new full State pension.

How do I claim my State Pension?

To receive your State Pension, you have to claim it as it isn’t paid automatically. As long as you’re within four months of reaching your State Pension age, you’ll be able to make a claim. You should get a letter no later than two months before reaching State Pension age which tells you what to do.

You’ll have to provide your National Insurance number when you claim, and you may need to provide evidence of your date of birth. Suppose you already receive benefits like Pension Credit as part of a couple when you reach State Pension age (i.e., the younger partner). In that case, you may not need to make a claim for State Pension as it’s awarded automatically.

If you have not received a letter, phone the claim line below, and they can tell you what you need to do:

• Telephone: 0800 731 7898
• Textphone: 0800 731 7339 
• Welsh language: 0800 731 7936
• Welsh language textphone: 0800 731 7013 

Or you can download a copy of the State Pension claim form at: www.gov.uk/government/publications/the-basic-state-pension Action.

Can I get an advance or backdate my pension claim?

Yes, you can claim your State Pension up to four months in advance but it won’t be paid until you reach State Pension age. The maximum you can backdate your claim is 12 months; more than that is considered a deferred claim (link to deferred claim). You don’t need to give a reason for backdating, and you’re also not paid any interest on a backdated lump sum.

Can I put off or defer my State Pension?

When you reach State Pension age, you can put off or ‘defer’ claiming State Pension for as long as you want. This means you may get a higher rate of State Pension later on. If you start receiving State Pension, you can change your mind and defer it, but you can only defer once.

You must defer for at least nine weeks. Your new State Pension increases by one percent for every nine weeks you defer or about 5.8 percent for a full year.

What decisions are made about my State Pension payments?

Once your claim has been processed, the Pension Service sends you a decision notice including details of how much your State Pension will be, how and when it will be paid, your duty to report relevant changes in your circumstances, and your appeal rights.

What do I do if I disagree with a pension decision?

If you think you’ve been awarded the wrong amount of State Pension or disagree with a decision about your State Pension, you can ask for the decision to be revised. That’s called a ‘Mandatory Reconsideration’ (MR). If you’re still unhappy with the decision after MR, you can appeal to an independent tribunal. There are time limits that apply, so it’s important to act quickly.

When will I receive my State Pension payment?

The State Pension is usually paid four-weekly in arrears, although you can ask to be paid weekly or fortnightly. Most people usually have their State Pension paid directly to their account.

Can I increase or inherit an additional pension from my spouse or civil partner?

You might be able to inherit an extra payment from your spouse or civil partner or qualify for a higher amount if you paid married women’s or widow’s reduced-rate National Insurance contributions only. It’s worth remembering that new State Pension is normally based on your own National Insurance record but

What is the additional State Pension and graduated Retirement Benefit?

Suppose you’re claiming your own State Pension, and the following applies. In that case, you can inherit part of a deceased spouse’s (or civil partner’s) additional State Pension and half of their graduated retirement benefit:

• your marriage or civil partnership began before 6 April 2016, and
• you could have inherited these amounts in the old pre-2016 system, and one of the following applies:
  • your partner reached State Pension age before 6 April 2016, or
  • they died before 6 April 2016 but would have reached State Pension age on or after that date.

Can I inherit a protected payment?

You can inherit half of a partner’s protected payment once you start claiming your own State Pension if your marriage or civil partnership began before 6 April 2016, and both the following apply:

• they reached, or would have reached, State Pension age on or after 6 April 2016, and
• they died on or after 6 April 2016

Can I inherit a deferral payment?

You can inherit some of your spouses’ or civil partners extra State Pension they received due to deferral if both of the following apply:

1. You were married or in a civil partnership when your partner died, and
2. You did not remarry or form a new civil partnership before you reached State Pension age

I’m a woman who paid reduced rate contributions

Until April 1977, married women could choose to pay a reduced rate of NI contributions (known as the ‘married women’s stamp’). Even after this date, anyone already doing so could continue paying the reduced rate.

This right stopped immediately on divorce, or if you chose to revoke your election and started paying the full rate. It also stopped automatically at the end of two complete tax years during which you earned below the level at which NI contributions must be paid, or you stopped working.

This affects entitlement based on your NI contributions because the reduced-rate NI contributions do not count towards qualification for State Pension. As a result, the rules allow State Pension to be worked out differently.

This depends on your right to pay reduced-rate NI still applying at some point in the 35 years before starting the tax year when you reach State Pension age. If you meet this condition, you do not need the minimum ten qualifying years to get a State Pension. You may get a State Pension that is either:

• the old pre-2016 lower rate basic State Pension of £82.45 a week (if married or in a civil partnership and your partner has reached State Pension age), or
• The old pre-2016 rate of basic State Pension of £137.60 a week (if widowed, divorced, or your civil partnership was dissolved).

You get any additional State Pension, and Graduated Retirement Benefit built up before 6 April 2016 on top. This is paid when:

• you or your spouse or civil partner reach State Pension age (whichever is later), or
• You reach State Pension age (if widowed or divorced), or you are widowed, divorced, or your civil partnership is dissolved after you reach State Pension age.

If it is more than you would be paid under new State Pension rules based on your own NI record, you get this amount.

What happens to my pension if I get divorced or dissolved civil partnership?

If you get divorced or dissolve your civil partnership, the courts can make a ‘pension sharing order.’

If you’re ordered to share your State Pension or protected payment with your ex-partner, your State Pension is reduced. If your ex-partner is ordered to share their additional State Pension or protected payment with you, you will get an extra payment on top of your State Pension.

What do I do if I have a change in circumstances?

If your circumstances change and you should report it to the pension service. If you’re unsure, it’s worth having a chat.

If I move abroad can I still claim my State Pension?

If you are moving abroad, State Pension can be paid to the country where you live. If you continue to live abroad, the annual State Pension increase is only paid if you live in the European Economic Area (EEA) or one the UK has an arrangement with.

What happens to my pension if I go into hospital?

If you go into hospital, you’ll continue to receive State Pension no matter how long you’re in the hospital. If you receive the Attendance Allowance (AA) and the payment is combined with your State Pension, then AA might be affected by a hospital stay, so you should tell the DWP.

If I go into a care home what happens to my pension?

If you go into a care home, your State Pension is not affected, but it is considered income if you ask the local authority for help with fees.

What other entitlements can I claim at retirement?

The age when you can claim State Pension may not be the same as the age at which you retire from work. You may stop work before or continue working after the State Pension age, or you might want to retire gradually, for example, by reducing your hours rather than leaving work completely.

Can I stop work before reaching the State Pension age?

Yes you can stop working before state pension age and you may be entitled to other benefits but you won’t be able to claim State Pension before you reach 66. 

Can I carry on working after the State Pension age?

Yes, you can carry on working after the State Pension age. Your tax code is adjusted to take into account the amount of State Pension you get. Your State Pension is not reduced due to earnings, but it does count as taxable income.

If you work for an employer after the State Pension age, you do not have to pay NI contributions. You should tell your employer because they must continue to pay contributions for you. If self-employed, you continue paying Class 4 contributions until the end of the tax year in which you reach State Pension age.

For more information, see www.gov.uk/tax-national-insurance-after-statepension-age/stopping-paying-national-insurance

What other benefits can I claim after the State Pension age?

You may be entitled to claim other benefits, such as Pension Credit, Housing Benefit and Council Tax Support (or Council Tax Reduction). You may be entitled if you work, but this depends on your income and savings.

You may also be entitled to Attendance Allowance which is not means-tested and helps with the costs of illness or disability.

Some benefits’ overlap’ with State Pension, including Carer’s Allowance, for people caring for someone else. If you claim Carer’s Allowance, it is not paid if your State Pension pays more than Carer’s Allowance, although you retain an ‘underlying entitlement to it.

If you claim Pension Credit, an underlying entitlement means a carer’s addition is paid with your Pension Credit. If you receive a Widow’s or War Widow’s Pension when you reach State Pension age, you may be better off remaining on these rather than claiming State Pension. Contact the Pension Service if this applies.

How much State Pension will I get at 55?

Because you don’t qualify for a State Pension until you reach 66, you won’t receive any State Pension at 55.

How much State Pension will I get at 66?

Your entitlement is calculated based on your NI contributions and various other factors. But for a single claimant receiving the New State Pension, it will be £179.60

What is the old State Pension?

The old State Pension rules are for men born between 6 April 1945 and 5 April 1951 or women born between 6 April 1950 and 5 April 1953. See ‘What are my current State Pension rates’ (internal link) for the rates of old State Pension. Some of the rules are the same as for new State Pension, including:

• State Pension statement
• How to claim your State Pension
• Decisions and payments
• Change in your circumstances
• Other entitlements at retirement

Your old State Pension can be made up of a combination of:

• Basic State Pension
• Additional State Pension
• Graduated Retirement Benefit
• Other payments.

What is the basic State Pension?

Basic State Pension is Category A State Pension if you paid 30 years of national insurance contributions, you get the full basic Category A State Pension (see table above). You get a reduced amount if you do not have enough qualifying years for a full Category A State Pension.

Category A Pension on your own NI contributions You get the full basic Category A State Pension if you paid or were credited with 30 years of NI contributions. You get a reduced amount if you do not have enough qualifying years for a full Category A State Pension.

Category B Pension on spouse or civil partner’s NI contributions You may be entitled to an increase of State Pension based on the NI record of a current or former spouse or civil partner or a deceased spouse or civil partner.

Category D non-contributory Pension This is a non-contributory State Pension for people aged 80 or over (although you must have reached State Pension age before 6 April 2016). If you receive a low State Pension, Category D pension can top up to £82.45 a week. To qualify, you must live in the UK on your 80th birthday, or the date of your claim if later, and have lived in the UK for ten years or more in any 20-year period after your 60th birthday. In some circumstances, you may be eligible if you live in another EEA country.

What is the additional State Pension?

You might be entitled to Additional State Pension (ASP) if you get Category A or B State Pension (you may even qualify if you don’t get any basic State Pension).

From 1978 to 2002, Additional State Pension was built up under the State Earnings-Related Pension Scheme (SERPS) and from April 2002, under the State Second Pension (S2P), based on earnings above the Lower Earnings Limit (LEL). LEL is the income threshold that dictates when you are treated as paying NI contributions as an employee.

State Second Pension Employees with earnings above the limit were entitled to an extra earnings-related payment. You can be treated as though your earnings were equal to this if, throughout the year, you were:

• entitled to Carer’s Allowance
• entitled to long-term Incapacity Benefit (or would be if you satisfied contribution conditions)
• paid Severe Disablement Allowance
• paid contributory Employment and Support Allowance in some cases
• awarded Home Responsibilities Protection (HRP)
• receiving credits as a carer or foster carer, or receiving Child Benefit for a child under the age of 12 (only since April 2010).

To qualify for a year of S2P before April 2010, you must fulfil one criterion for a whole tax year. e.g. you wouldn’t qualify if you provided care for part of a year and met the disability conditions for the rest of the year, or paid NI contributions for part of the year and were entitled to HRP for the rest of it.

Are there any other State Pension payments?

An extra 25p a week is paid on Category A and B pensions if you are aged 80 or over. An automatic Christmas bonus of £10 if you live in the UK during the qualifying week (usually the first full week of December). It’s tax-free and doesn’t affect any other benefits.

Do I have to claim my other pensions if I take my State Pension?

The short answer is ‘no, you don’t have to claim your other pensions if you take your State Pension.’ If you do check your State Pension and are thinking about taking it. It’s well worth speaking to an independent financial advisor to find out exactly where you stand.

How do I make sure my State Pension is enough to live on?

Knowing exactly what you want from life and retirement is one thing, but knowing you’ll have enough money to live on for the rest of your time is another. The best way to be sure you’ll have enough is to seek independent financial advice to find out what’s best for you and your situation.

For further reading we have articles on the following topics…

Consolidating or combining a pension pot
Transfering or withdrawing a defined contribution pension
Accessing pension pot early terminal illness

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