The UK state pension is a crucial piece of your retirement plan, and it's important that you understand how it works so you can maximise your benefits and improve your financial stability later on in life.
What is the State Pension?
The State Pension is a 4-weekly payment from the government that most people can receive when they reach state pension age, provided they have made enough National Insurance contributions. The amount you receive is based on how many year's contributions you have paid, so not everyone receives the same amount.
For many people, the State Pension is just one piece of their retirement income. They may also receive funds from a workplace pension, personal pension, or continued earnings.
When can you claim the State Pension?
You can start claiming for the State Pension when you reach the 'State Pension age'. This is currently 66 years old, however, this is set to increase. If you were born after the 5th of April 1960, your state pension age is set to increase to 67 between 2026 and 2028 and may increase further as life expectancy continues to grow.
To find out your exact State Pension age, you can use the government's State Pension age calculator, which gives you a personalised date based on your date of birth: Check your State Pension age - GOV.UK (www.gov.uk)
How many years of National Insurance contributions do you need?
To qualify for the full new State Pension, which in the 2024/25 tax year is £221.20 a week, you must have made 35 qualifying years of National Insurance contributions. However, you still receive a proportion of the State Pension if you have between 10 and 35 years of contributions.
Let's break it down:
Less than 10 years: No State Pension entitlement
10 to 34 years: you will receive a proportion of the full state pension, calculated based on your specific number of qualifying years
35 years or more: You will be entitled to the full State Pension
Please note the new State Pension rules apply to those who reached the State Pension age on or after the 6th of April 2016. If you reached the State Pension age before this date, you will receive the basic State Pension under the old rules.
How do you build up National Insurance contributions?
A qualifying year of National Insurance contributions can be built up through:
Employment: If you are employed, NI contributions are deducted from your wages by your employer
Self-employment: Self-employed individuals pay class 2 and class 4 contributions
Voluntary contributions: If you have gaps in your NI record, you can make voluntary contributions (class 3) to fill those gaps and boost your State Pension entitlement
Credits: Certain benefits, such as Jobseeker's Allowance, Employment and Support Allowance, or Child benefit received for a child below 12, can earn you NI credits. This helps you to build up qualifying years without direct contributions.
Checking your State Pension Forecast
You can check your State Pension forecast via your government gateway account (linked below). Here you can view the amount of State Pension you are likely to receive based on your current NI record, the earliest date you can claim your State Pension, and if there are any gaps in your NI record that you can fill.
If you don't already have a government gateway account, make sure to check out our step-by-step guide on how to set one up!
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