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How does the UK State Pension work?

How does the UK State Pension work?
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The UK State Pension is a complex beast. Sometimes, it can be difficult to figure out how the whole thing works.

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We’ve put together this concise guide to help you understand the fundamentals of the scheme.

What is the UK State Pension?

It’s a regular payment from the government paid to pensioners after they reach a certain age. It is often a crucial part of pensioners’ retirement income.

Other pensioners use it to complement their other sources of retirement income, such as workplace or personal pensions, savings or investments.

The State Pension increases every year due to a mechanism known as the triple lock.

Does everyone get it?

No. The State Pension is not automatically paid to everyone in their old age.

People entitled to the pension are those who have made a sufficient number of National Insurance (NI) contributions during their working life.

NI contributions are usually taken from your salary once you’ve reached certain thresholds.

For example, you pay mandatory National Insurance if you are 16 years and older and are either:

  • An employee making more than £184 a week
  • A self-employed individual making profits of £6,515 or more a year

The exact amount of NI depends on what you earn or what you make as a profit. You can also pay voluntary contributions to avoid gaps in your NI contributions.

To be eligible for the State Pension, you need to have at least 10 qualifying years of National Insurance contributions on your record. These years don’t have to be in a row.

Qualifying years are earned through actual NI contributions or through NI credits that you can get if you are a parent, a carer or are unemployed.

To learn more about National Insurance, visit the gov.uk website.

How does the State Pension work?

There are two types of State Pension. Here is a brief overview of how each works.

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1. Basic State Pension

This is the old-style pension that is available to:

  • Men born before 6 April 1951
  • Women born before 6 April 1953

This old pension includes two parts:

  • A basic State Pension that is based on your previous NI contributions.
  • An additional pension that’s also based on your NI contributions and other factors such as earnings.

To get the full basic State Pension, which is currently £137.60 per week, you must have 30 qualifying years of National Insurance contributions.

If you are eligible to claim the basic State Pension, you may also be eligible for the additional pension. More information about this additional pension, including who is eligible and how to claim it, is available on the gov.uk website.

2. New State Pension

This is available to:

  • Men born on or after 6 April 1951
  • Women born on or after 6 April 1953

The amount of this pension is strictly dependent on your NI records.

To get the full new State Pension of £179.60 per week, you need to have 35 years of National Insurance contributions. The record includes contributions made both before and after 6 April 2016.

Most people claiming this pension will have made or been credited with National Insurance contributions before 6 April 2016 when the new rules took effect.

The new rules, however, make sure that the amount you get for your NI contributions to 6 April 2016 is no less under the new State Pension than it would have been under the old system, provided you meet the 10-year minimum qualifying period.

The best way to find out how much you could get is by contacting the Future Pension Centre on 0800 731 0175 or by checking your State Pension forecast on the gov.uk website.

When do I get it?

You have to reach a certain age before you can claim it.

For both men and women, it’s currently 66. However, it’s scheduled to rise in the next few years. To find out when you’ll reach State Pension age, use this government calculator.

Where can I find out more?

The government maintains a comprehensive website with additional information and details about the State Pension.

If you need further assistance, information, or advice about the State Pension, there are numerous organisations that can help. These include the Pensions Advisory Service, Age UK and the Money Advice Service.

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