Guide to the state pension

What will I receive from the state in my retirement?

The State Pension is a vital source of income for millions of retired people across Britain. However, the system can be complex and it’s important that you know how it works. If you’re looking to maximise your income in retirement, a good place to start is with your State Pension.

If you’re not receiving the full amount or are not on track for it, then it’s worth considering topping up. The cost of doing this is effectively subsidised by the government, which means it can be very good value for money. The amount of State Pension you get is based on your record of National Insurance Contributions (NICs). If you haven’t made sufficient contributions then you will not receive a full State Pension. But you may be able to pay voluntary contributions to boost the amount you receive, even if you’ve already retired.

What are the basic state pension rules?

How much is the full Basic State Pension worth?

What is the New State Pension?

Can I receive both the Basic State Pension and New State Pension?

Is the earnings benchmark of the State Pension triple lock being temporarily set aside?

Do I have the option to defer the New State Pension?

How can I check my State Pension entitlement?

What are the basic pension rules?

To receive the basic State Pension you must have paid or been credited with National Insurance contributions. You can claim the basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953. If you were born later, you’ll need to claim the New State Pension instead. You’ll usually need at least ten qualifying years on your National Insurance record to receive any State Pension, but they do not have to be ten consecutive years to qualify. The minimum of ten years National Insurance contributions only applies under the New State Pension but not the old which would be on a proportionate basis.

This means for ten years at least one or more of the following must apply to you: you were working and paid National Insurance contributions; you were receiving National Insurance credits, for example, if you were unemployed, ill or a parent or carer; or, you were paying voluntary National Insurance contributions.

You might also qualify if you’ve paid married women’s or widow’s reduced rate contributions. Once you reach the State Pension age, you do not need to stop working but you’ll no longer have to pay National Insurance.

The earliest you can start receiving the New State Pension is when you reach the State Pension age.

If you would like to start a conversation about your retirement options, please send us a message below – we look forward to hearing from you.

How much is the full Basic State Pension worth?

Currently, in the 2024/25 tax year, the full Basic State Pension is £221.20 per week.

You may be able to increase your Basic State Pension through your spouse or registered civil partner or inherit some of your spouse’s or registered civil partner’s State Pension when they die.

For the 2024-25 tax year, the full rate of the new state pension is £221.20 per week, equating to an annual income of £11,502. As a couple, this could provide up to £442.40 per week, or £23,005 annually. However, the amount you receive depends on having accumulated enough qualifying years.

What is the New State Pension?

The New State Pension replaces the previous system of the Basic State Pension and the Second State Pension. You can claim the New State Pension if you are a man born on or after 6 April 1951, or a woman born on or after 6 April 1953.

The earliest you can start receiving the New State Pension is when you reach State Pension age. If you reached State Pension age before 6 April 2016, you will continue to receive your pension under the old rules.

For the 2024/25 tax year, the full New State Pension is £221.20 per week, giving an annual income of £11,502. The exact amount you receive will depend on your National Insurance record. The only ways to increase this amount are if you have a higher entitlement due to additional State Pension or if you defer by delaying your pension payments.

WHAT CAN I DO TO MAKE SURE THAT I HAVE ENOUGH MONEY WHEN I RETIRE IN LEAMINGTON SPA?

If you feel that the State Pension and your other retirement savings might not be enough for you, you might still have time to top up your pension plan or save in other ways. It’s a good idea to regularly review your retirement planning to make sure you’re on track. To review your plans, or to find out more, please get in touch with our financial planning firm in Leamington Spa for further information.

Call us on 01926 969 010 | Email us here >

Can I receive both the Basic State Pension and New State Pension?

People who reached the State Pension age on 6 April 2016 can receive both their accrued basic and second pension entitlements under the old rules as well as their New State Pension entitlement under the new system.

An individual will either claim under the old State Pension rules or the New State Pension rules and are unable to claim under both – if your State Pension age is prior to 6 April 2016 it will be based on the old rules and if after 5 April 2016 it will be based on the new rules.

You can carry on working and paying National Insurance contributions until you meet State Pension age. You can also apply for National Insurance credits, which can fill gaps in your record.

Is the earnings benchmark of the State Pension triple lock being temporarily set aside?

For the 2024/25 tax year, the state pension will see an 8.5% increase under the triple lock guarantee. This means the full new state pension will rise to £221.20 per week, which translates to £11,502 annually. The basic state pension, which applies to those who reached pension age before April 6, 2016, will increase to £169.50 per week, or £8,814 annually.

This increase is aligned with the earnings component of the triple lock, which guarantees that state pensions grow by whichever is highest among wage growth, inflation, or 2.5%. Despite previous discussions about potential changes or the suspension of the triple lock, it will continue to be applied for the 2024/25 tax year.

However, due to the freeze on personal tax allowances until 2028, more pensioners may be required to pay income tax on their state pension as it edges closer to the £12,570 threshold.

Do I have the option to defer the New State Pension?

You’re eligible to collect your New State Pension the week you reach State Pension age, but you don’t have to. You can defer the payment of your New State Pension but should only consider doing this if you are in good health, and do not need the money from the State Pension now. It is more appropriate to defer for those people who are still working or who have retirement income from a company or private pension which means the State Pension would take them into a higher tax band.

How can I check my State Pension entitlement?

As well as checking your State Pension age, you can check your entitlement by obtaining a State Pension forecast. A State Pension forecast can tell you: how much State Pension you could receive, when you can start receiving it and how to increase it, if you can, by adding to your National Insurance record.

You can carry on working and paying National Insurance contributions until you meet State Pension age. You can also apply for National Insurance credits, which can fill gaps in your record. You can also do this by paying voluntary contributions.

The amount you are forecast to receive assumes you make, or are credited with, the maximum number of National Insurance credits in the years up to your State Pension age.You can check the level of your State Pension entitlement online, using a Government Gateway account, by completing form BR19 that can be obtained from the GOV.UK website.

Is my state pension likely to be enough?

Many people may be looking to rely on the State Pension to provide them with income in retirement. However, the amount received is not generous by any standard and as a result the onus is on individuals to take personal responsibility to save for retirement.

If you would like to start a conversation about your retirement options, please send us a message below – we look forward to hearing from you.

Call us on 01926 969 010 | Email us here >

This guide is for your general information and use only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. All figures relate to the 2021/22 tax year, unless otherwise stated.