Your quick guide to the State Pension
The key questions - answered
Important: This information is not personal advice. If you are unsure how to proceed please seek advice. Any amounts referred to are for the 2018/19 tax year. Tax and pension rules can change and benefits depend on personal circumstances. Investments can fall as well as rise in value so you could get back less than you invest.
How the State Pension works
The State Pension is a vital source of income for many people in their retirement.
Once you reach ‘State Pension Age’, the government pays you a guaranteed income for the rest of your life based on your National Insurance record.
You don’t get it automatically - you have to claim it. You should get a letter four months before you reach State Pension Age, telling you what to do. If you’ve been employed for most of your working life, you should qualify.
You don’t have to start receiving payments straight away, you can choose to defer for as long as you want and receive an increase as a result.
Tom McPhail explains the State Pension in four short videos
Will I get a State Pension?
When will I receive my State Pension?
How much State Pension will I receive?
What do I need to know about the State Pension?
Frequently asked questions
Will I get a State Pension?
The OLD State Pension
You'll qualify if:
- You’re a man born on or before 5 April 1951 or a woman born on or before 5 April 1953, and
- You’ve paid National Insurance (NI) contributions or received NI credits for at least 1 year
You may also qualify based on your spouse or civil partner’s NI record.
The NEW State Pension
You'll qualify if:
- You’re a man born on or after 6 April 1951 or a woman born on or after 6 April 1953, and
- You’ve paid National Insurance (NI) contributions or received NI credits for at least 10 years
How much State Pension will I get?
The amount you’ll receive largely depends on how many ‘qualifying years’ of National Insurance (NI) contributions you have.
The number of qualifying years you have will depend on how many years you’ve been employed or self-employed and paid National Insurance contributions.
||Old State Pension
||New State Pension
|Maximum weekly payment
|£125.95 basic + any additional
|NI years needed for full rate
|NI years to qualify for
Can I increase the amount of State Pension I receive?
There are two ways you can increase the amount of State Pension you’ll receive:
1. Defer your State Pension
You don’t have to start receiving payments straight away when you reach State Pension Age, you can choose to defer for as long as you want and receive an increase in your future State Pension as a result.
This can be helpful if you’re still in work, because you’ll get larger payments later, when they might be of more use to you (or you might be in a lower tax band).
If you qualify for the new State Pension, for every 9 weeks you defer - your payment will rise by 1%. For example, if you qualify for a State Pension of £8,546.20 a year (the full new State Pension) and defer for 1 year, you’ll increase your starting income by £481 a year (that’s just under a 5.8% increase), but remember you will have missed out on a year’s income.
If you are in receipt of the old State Pension and have not previously deferred then you can defer and receive an increase of 1% for every 5 weeks of deferral (or around 10.4% per year).
You can also defer receiving payments once you’ve already started claiming, but you can only do this once.
2. Buy ‘extra’ pension years
If you have gaps in your National Insurance history, e.g. if you have stopped work early, you may be able to fill these by making voluntary National Insurance contributions.
Paying a one-off lump sum could increase the amount of State Pension you receive by thousands over your lifetime. However, you’ll need to consider what else you could have used that money for and how long you might need to live to get a good return in order to work out whether it’s the right thing to do.
You should also consider whether you are likely to be eligible for pension credit (see below) before deciding whether to buy extra years.
You can check for NI gaps online by requesting a State Pension statement from the government website. Normally, you can only make up for gaps from the last 6 years.
What is pension credit?
Pension credit is an income-related benefit for low earners who do not qualify for the full weekly flat-rate of £164.35. After the government assesses your income and savings, they may top up your State Pension. Receiving pension credit does not mean you will lose entitlement to other benefits. The government’s calculator will help you find out if you are eligible and how much you could get – www.gov.uk/pension-credit-calculator.
One question to ask yourself
While the State Pension may be the main source of retirement income for many, it’s unlikely to give you all the income you need for the retirement of your dreams.
The new State Pension is £164.35 per week, which is £8,546.20 each year.
Could you live comfortably on this amount? Or would your standard of living be affected?
If you’re not sure, you can try our free tools, which should help:
Boost your retirement savings
Pensions are one of the most tax-efficient ways of saving for retirement. If you want to have more than the State Pension in retirement, you could boost your savings, and receive tax relief, by contributing to a pension.
Most people can receive up to 45% pension tax relief for this tax year (2018/2019) when making a contribution to a pension, such as our Self-Invested Personal Pension (SIPP). Basic, higher and top-rate taxpayers can benefit: the higher your rate of tax, the more you could receive, as tax benefits depend on personal circumstances. If you’re a Scottish taxpayer the amount of tax relief you can claim is different. Take a look at our information on the
Scottish income tax changes page. Remember that rules can change. As you’re investing for retirement with a pension, you can’t usually access your money until age 55 (rising to 57 from 2028).
- You contribute £8,000 into your pension.
- The government adds £2,000, to make a total investment of £10,000.
- Higher and top-rate taxpayers can then claim back even more via their tax return. £10,000 in a pension could therefore effectively cost a 40% rate taxpayer as little as £6,000 and a 45% rate taxpayer as little as £5,500.