One of the things our research makes really clear is just how big a role state pension will have to play in supporting people in their retirement –In fact our research indicates that state pension is expected to make up most of the retirement income for at least half of people. (A)
But only around a third of people are aware of what they will receive or when so in this short video we will do our best to demystify the state pension so that you can prepare better for your retirement and I’ll also share details of a looming deadline for those of you who can take action to improve your state pension.
So What is the State Pension?
Well let me kick off with busting a myth – you don’t have a state pension fund! Rather than this being a fund it’s actually a benefit, or entitlement that you accrue from the state over your lifetime and there are specific rules about how you accrue this benefit.
It’s completely different from your workplace pension or private pension and doesn’t offer much flexibility over how and when you take this but it’s a massive and very valuable part of most people’s income in retirement.
You become eligible for state pension when you reach State Pension age. This isn’t the same age for everybody but you can easily check your state pension age on the Government website, (1) for most people this will be some point in your late 60’s . For me it’s 67.
Finding the age at which you are due to receive state pension is easy as all you need to know is your date of birth. You can’t take state pension early but you can delay it if for example you are still working and would prefer it to start later, if you delay it you’ll get a boost to starting level of income.
To find out how much you are on track to get you need your secure government gateway ID – if you don’t have this you can set it up online.
When you log in it will tell you how much you are on track to get and will show you your National Insurance record and importantly identify any shortfalls you may have. This is a really important piece of information, as it’s through your National Insurance record that you build up state pension.
So how do you qualify for the State Pension?
The full New State Pension is currently £221.20 per week, which is just over £11,500 per year (2), however the actual amount you will get depends on your national insurance record.
If you’ve paid at least 10 years of National Insurance contributions, then you’ll qualify for some State Pension, if you have less than ten years you won’t normally get any state pension although some overseas countries and the EU do have a social security agreement with the UK – so worth checking that out if you’ve been working overseas.
You need a total of 35 years of National Insurance Contributions or National Insurance credits to claim full New State Pension.
In both cases this includes if you’ve been paying National Insurance contributions as self-employed, or when you’ve been in receipt of certain benefits such as child benefit or carers credit.
If you do find you have a shortfall in your State Pension, you can usually pay voluntary contributions to cover the previous 6 years. The deadline is to make additional contributions is 5th April each year.
This ability to make up for shortfalls in NI contribution history has got a lot of interest with the likes of Martin Lewis encouraging people to make up for their missing contributions and there has been so much demand for people doing this that the government has extended the deadline for making voluntary NI contributions for people with gaps in their record to 5th April 2025. So unless rules change this is the last year you can make up for missing years going all the way back to 2006, after which it’ll revert to the standard 6 years. If you think this could affect you, now is the time to act, this is the looming deadline I mentioned at the start – this could help many more people get a fuller state pension so well worth checking your record. (3)
And What about when you get to state pension age? Well, you don’t normally get it automatically – you have to claim the State Pension.
After you’ve made a claim, you’ll get a letter advising you of your pension payments 2 months before you reach your State Pension age. If you don’t receive your letter, make sure you go to the Government website to make a claim.
The new State Pension is usually paid every 4 weeks into an account of your choice with payments paid in arrears, for the last 4 weeks, not the coming 4 weeks. And remember under current rules, state pension increases each year in line with something called the triple lock which gives some protection from inflation.
So there it is – get on top of your state pension entitlement, it plays a massive role in most people’s retirement income and finding out what you are entitled to an when you’ll get it is pretty straightforward and really worth your while.
For more information on the State Pension, visit the Government website. (4)
