State Pension

Did you know the full State Pension is currently around £9,600 a year? For many people, that’s not to be sneezed at – it could be a significant part of your retirement income. Especially since there’s research suggesting 1 in 6 people in the UK over 55 have no pension savings other than the State Pension.

Yet the State Pension still seems to be a big mystery to a lot of people. We’re going to look at how it works, how to find out how much you’ll get and when, and how you might be able to get more.

So how does State Pension work?

You build up State Pension by paying National Insurance contributions or getting National Insurance credits. Each year you pay ‘full-rate’ National Insurance contributions, or get National Insurance credits, is called a qualifying year.

How much is State Pension?

You need 35 qualifying years to get the full amount of State Pension, which is £185.15 a week or £9,627.80 for the year in 2022-23.

If you don’t have 35 qualifying years you won’t get the full amount of State Pension. You will get some if you’ve got at least 10 qualifying years. You can see how many qualifying years you’ve got by checking your National Insurance contributions record. Later we’ll look at what you could do to get more qualifying years.

How much State Pension will I get?

You can apply for a State Pension forecast. This looks at your National Insurance record, how much you earn and how many years you have to go to State Pension age and gives you an estimate of your State Pension. The nearer you are to State Pension age, the more accurate it’s likely to be.

When will I get my State Pension?

At your State Pension age, but this keeps changing. It could be 66, 67 or 68 depending on when you were born. Check your State Pension age.

You don’t get State Pension automatically – you have to claim it. You should get a letter around two months before you reach your State Pension age, telling you how to claim. Even if you haven’t got the letter you can claim once you’re four months away from reaching State Pension age. Find out how to claim.

It’s worth knowing you can defer State Pension – delay taking it until later than your State Pension age. If you do this, you might get a higher amount.

How can I increase my qualifying years?

You may not have enough qualifying years to get the full State Pension.

For example, you may have gaps in your working life when you took time out to care for children or other family members, you were unemployed, or you went back into full-time education.

You might also have paid National Insurance contributions at less than the full rate because you were in a workplace pension that was contracted out of part of the State Pension. This meant you didn’t build up part of the State Pension, and your pension scheme promised to pay you at least as much as the missing State Pension instead. It’s something many workplace pensions used to do – and a lot of people didn’t realise it was happening.

Claiming National Insurance credits

First, check if you can claim National Insurance credits. There are a lot of ways to qualify for National Insurance credits including:

• caring for children or other family members
• being unable to work because of illness or disability
• getting certain kinds of benefits, including Jobseeker’s Allowance and Statutory Sick Pay
• going on jury service (unless you’re self-employed)
• living abroad because you’re married to, or a civil partner of, a member of the armed forces.

You might get National Insurance credits automatically, or you might have to claim them. Check if you can claim National Insurance credits.

Buying extra qualifying years

It might be worth buying extra qualifying years. Until 5 April 2023 you can buy qualifying years to fill gaps going back to 2006. After this, you’ll only be able to fill gaps in the last six tax years.

The closer you are to State Pension age, the easier it is to work out whether this would be good for you. It can be good value – it currently costs £824 for a full qualifying year, and this could get you an extra £5,000 of State Pension in the future. But it is complicated, and there are a lot of things to take into account. It’s worth contacting the government’s Future Pension Centre to see if it’s right for you.

The old State Pension arrangements

We’ve been focusing on the current State Pension arrangements that started in April 2016. Before this, State Pension was even more complicated. It consisted of a flat-rate ‘basic’ State Pension and an ‘additional’ State Pension based on how much you earned.

The changes in 2016 were designed to make it fairer – for example, by enabling people who can’t work for various reasons to build up State Pension.

Can we help you?

Baffled about pensions? Not sure what the best thing is to do? Ask us for help. We love helping people get the best out of their money.

Here are a few of the reasons you might want to give us a go.

• The personal touch. We go out of our way to understand you, your life situation, and what you want.
• We really know our stuff. We’ve got over 50 years’ experience of helping people plan and achieve the retirement they want.
• We’re completely independent and unbiased. 
• Your first consultation is on us.

We can help you plan the retirement you want, so you can get on with enjoying life without having to worry about money – now or in the future.