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UK State Pension: who is eligible? And who isn’t?

UK State Pension: who is eligible? And who isn’t?
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The UK State Pension is a regular payment from the government to people who’ve reached a certain age.

It’s a vital source of retirement income for many, but not everyone can access it. So, who is eligible and who isn’t? Let’s find out.

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Am I eligible for the UK State Pension?

In order to be eligible for the State Pension, you have to meet certain criteria set by the government.

You must have reached the State Pension age and made a minimum number of National Insurance contributions (NICs) throughout your working lifetime.

There are several classes of National Insurance contributions:

  • Class 1 contributions – paid by employees
  • Class 2 contributions – paid by self-employed people earning profits of £6,515 or more a year
  • Class 3 contributions – voluntary contributions to fill or avoid gaps in your NICs record
  • Class 4 contributions – paid by self-employed people earning profits of £9,569 or more a year

To get the UK state pension, you need at least 10 qualifying years of NICs on your record. These years don’t have to be consecutive.

The qualifying years can be earned through any of the above-mentioned types of National Insurance contributions. However, you can also earn them through National Insurance credits. NI credits are usually given to:

  • People who are not working due to illness, unemployment or maternity leave or people who are working but don’t earn enough to pay for National Insurance.
  • Parents of children under the age of 12 for whom they claim Child Benefit
  • People caring for someone sick or disabled

Which kind of State Pension could I be eligible for?

There are currently two State Pension systems: the new State Pension and the basic State Pension.

The kind of pension you will get depends on how old you are and when you retire.

  • Eligible men born on or after 6 April 1951 and women born on or after 6 April 1953 get the new State Pension.
  • Eligible men born before 6 April 1951 and women born before 6 April 1953 get the basic State Pension.

If you are eligible for the State Pension, you must apply for it; it is not paid to you automatically.

How much State Pension can I get if I am eligible?

The full rate of the new State Pension is £179.60 while that of the basic State Pension is £137.60.

However, not everyone gets the full rate. The amount you receive will depend on the number of qualifying years on your record.

To get the full new State Pension, you need 35 years’ worth of National Insurance contributions. For the full basic State Pension, you need 30 qualifying years.

If you have fewer years of contributions than are required for the full State Pension but at least 10 years’ worth, you will still be eligible for State Pension, but the amount you get will be less.

You can use the government’s State Pension forecast tool to check how much State Pension you could get.

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How can I financially secure my retirement?

The UK State Pension is an important part of retirement income for a lot of pensioners. However, it is considered insufficient to ensure a comfortable standard of living in retirement. That is why it is a good idea to look for other ways to supplement your retirement income.

A workplace pension is an excellent option. In fact, the government has made it mandatory for all employers to enrol eligible employees in workplace pensions unless they choose to opt-out. If you are not currently in one, speak with your employer to learn your options.

You can also put money into a personal or self-invested personal pension (SIPP).  With this kind of pension, you get to choose the provider as well as the amount of money to invest.

Investing in stocks is yet another way to feather your nest. Over the long term, the stock market has a good track record of helping investors build wealth. It’s still important to remember that past performance is not a reliable indicator of future returns.

The opportunity to invest in stocks can be even more favourable when combined with the tax advantages of a stocks and shares ISA account.

This is essentially a tax wrapper that shields your investment from capital gains tax and income tax. Note, however, that tax rules can change in the future and their effect on you will depend on your individual circumstances.

Remember, it’s never too early to start planning for retirement. The sooner you begin, the more time you will have to save for the lifestyle you want in your golden years.

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