Thereís no getting away from it, the state pension is not easy to understand. This guide helps you find out what it is, whether you qualify for it, and how much you'll get. It'll also tell you when you can expect to start claiming your pension.
We also tell you how you can boost the amount of state pension you'll get - paying a few hundred quid now could lead to a gain of thousands later on, for some. We'll tell you how, including a calculator to help you find if it's worth it.
In this guide...
IMPORTANT! This guide is based on current pension rules in 2015-16. The Government has announced radical changes to the state pension to create a flat-rate state pension (more details of which can be read in the state pension reform news). The new flat-rate pension will be introduced in April 2016.
State pension need-to-knows
The basic state pension is a Government-administered scheme, funded by national insurance (NI) contributions, to give people who've reached state retirement age a guaranteed weekly income - currently £115.95 a week for a single person.
The state pension is a set weekly income until you die
The state pension is designed to give those who have reached the Government-defined retirement age a guaranteed weekly income. The current retirement age is 62 for women and 65 for men but both are rising soon (see the MSE Pension age to rise to 68 story).
The state pension is funded by national insurance contributions
The basic state pension is a Government-administered scheme. The amount youíre entitled to is calculated by the number of NI years youíve accumulated. You earn a qualifying year by working and paying NI contributions in that year, if youíre a carer, or if youíre on certain benefits.
The most you'll currently get from the basic pension is £115.95 a week
However, if youíre short of your NI years you wonít get the full amount. The amount rises every April based on the previous Septemberís inflation rate (using the Consumer Prices Index), the increase in average earnings, or 2.5% - whichever is highest.
You can increase your weekly income from £115.95 if you qualify for savings or pension credit.
There is also something called state pension top-up, where you pay a lump sum, priced depending on your age, to increase your weekly amount of basic state pension for the rest of your life. It's not suitable for everyone, see the state pension top-up guide for more information.
When you get the state pension depends on when you were born and your gender
You'll qualify for the state pension at the Government's official retirement age, which depends on when you were born and your gender.
The official retirement age is gradually being raised, so while many women currently get it at 62 and men at 65, this age will rise to 66 for both genders by 2020, 67 by 2028 and possibly even 68 by the 2030s.
To find out when you'll get your pension, use the Government's State Pension Age Calculator.
You don't have to take your state pension straight away
Delaying the date you start to take your state pension is one of the ways you can boost it. (see how to boost your pension below).
You should be sent a claim form four months before your pension age
The Pension Service should automatically send you a claim form four months before you reach the official retirement age. Your pension is paid directly into your current account. If you donít receive the forms, call 0800 731 7898.
The most important thing to understand about the state pension for those who qualify is:
The basic state pension is NOT means tested. It doesn't matter what your former salary was or how much you've got in savings.
Instead, the amount you receive depends on a number of factors, most importantly the amount of NI you've contributed over the years and the age you start collecting it.
Therefore for some, it's possible to massively boost what you receive by making small additional top up contributions, or delaying the start of your pension. But to make that decision, it's important to first understand how the state pension works.
You can get a second state pension too
The state second pension is an extra amount of money you could get with your basic state pension, based on your NI contributions.
How much you get depends on your earnings and whether youíve claimed certain benefits. Thereís no fixed amount like the basic state pension.
The maximum you could get in 2015/16 is £160 a week. This is in addition to the maximum basic state pension of £115.95, which could potentially take your total state pension to £276 a week (for an individual).
The second state pension is paid with your basic state pension and you get it automatically, unless youíve contracted out of it.
Check if you're eligible for the second state pension.
You would have contributed towards your second state pension through your NI contributions when you were:
- Employed and earning over the lower earnings limit of £5,824 a year (in 2015/16)
- Not contracted out (for example, if you're paying in to a workplace pension)
- Looking after children under 12 and claiming child benefit
- Caring for a sick or disabled person more than 20 hours a week and claiming carerís credit
- Working as a registered foster carer and claiming carerís credit
- Receiving certain other benefits due to illness or disability
Youíre not eligible if you were:
- Employed and earning less than £5,824 per year
- In full-time training
Contracting out of the second state pension
You can only contract out if your employer runs a contracted-out pension scheme, so youíll need to check with it.
If youíre a member of a contracted-out workplace pension you donít contribute to the second state pension for the time you belong to the scheme.
This means that when you retire you either donít get any second state pension, or it might be reduced - depending on how long you contracted out for.
You and your employer pay lower National Insurance contributions while you contract out.
To contract out you must be:
- Earning at least the lower earnings limit of £5,824 a year (in 2015/16)
- Paying Class 1 NI (or treated as paying them - check with your employer)
- The second state pension is set to be abolished in 2016, when a new flat-rate pension will replace both the basic state pension and the second state pension. However, if you've built up second state pension contributions, you'll still be entitled to some of the benefit.
We've worked hard to make this guide easy to understand and accurate. So please give us your feedback, include anything that doesn't make sense or tell us where more info's needed.
Do you qualify for the state pension?
To get the FULL state pension you'll need to have worked for most of your adult life and paid NI contributions, or been on qualifying benefits. The amount you're entitled to is calculated by the number of NI qualifying years you've accumulated.
The qualification criteria changes with the year you were born. If you have a shortfall you will receive a letter from HM Revenue & Customs (HMRC) once a year to inform you of it.
What is a qualifying year?
To gain a qualifying year, you need to earn a set minimum during a tax year (6 April to 5 April) and pay the required NI contributions. For 2015/16, this is:
- £5,824 for employees
- £5,965 for the self-employed
In past years, the amount was, of course, lower, but it has always been at a similar figure in relation to average salaries. So only those on very low wages may have missed out.
How many qualifying years do you need?
This depends, as the amount needed reduced in 2010 and will change again in 2016.
If you'll reach (or did reach) state pension age between 2014 and 2016 you'll need 30 qualifying years to get the FULL basic pension.
If you reach pension age in 2016 or later, you'll need 35 years.
What about full time parents & those who can't work?
If you're looking after children, or unable to work, this is taken into account. You may be eligible for NI credits, which count as a qualifying year.
These are normally automatically awarded for the weeks you were claiming and receiving any of the following benefits: carer's allowance, jobseeker's allowance, incapacity benefit, employment and support allowance.
You also get them if you are a full-time parent who claims child benefit for someone under 12, or a full-time carer who claims income support.
Credits for parents and carers replaced Home Responsibilities Protection from 6 April 2010.
If you reach(ed) state pension age on or after 6 April 2010 and you had years of Home Responsibilities Protection before 6 April 2010, these years have converted into credits, up to a maximum of 22 years. These will go towards your basic state pension.
I don't have enough qualifying years, what will I get?
You may still be entitled to a PARTIAL state pension, but it depends on when you hit retirement age and how many qualifying years you have.
Retirement age hit BEFORE 6 April 2010:
If you had fewer than 25% of the qualifying years then you wouldn't be entitled to a basic state pension. If you have 25% or more, it's likely you're getting an approximate pro-rata weekly income. In other words, if you'd half the qualifying years you'd get roughly half the full state pension.
However, if you don't qualify for the basic state pension and have no other income you're usually eligible for pension credit, which ensures you receive a guaranteed minimum income. Plus, if you're over 80 and qualify for less than £66 a week, you'll still get a minimum £66. See the full Pension Credit guide for more information.
Retirement age hit on or AFTER 6 April 2010 (but before April 2016):
If you have at least one qualifying year, you'll get a thirtieth of the full amount for each qualifying year. Therefore, if you've eighteen qualifying years you'll get 18/30th (three fifths) of the FULL state pension.
Retirement age hit in April 2016 or AFTER:
You will need to have at least 10 qualifying years to get anything, but this will only entitle you to £41 per week. If you have between 10 and 35 qualifying years, you'll get a pro-rata rate - so if you've 25 years, you'd get £111 (25/35ths of the FULL flat rate pension of £155).
If you haven't got any other income or savings, this doesn't mean you won't get any more from the state. The pension credit benefit guarantees a minimum income for those with little earnings.
However, you can boost your pension by buying qualifying NI years - we detail how, when and whether you should do this below.
What happens to my pension if I retire abroad?
Once you reach the official retirement age you can claim your state pension, no matter where you live. However, what happens then depends on where you retire to.
In some countries, your pension will be frozen at the amount you're able to claim in the year you leave the UK. Which may be fine now, but future inflation's likely to mean that you get less and less in real terms with each passing year.
To continue to get pension rises as if you're in the UK, you'll need to retire to:
Any country in the EU, Barbados, Bermuda, Bosnia-Herzegovina, the Channel Islands, Croatia, Isle of Man, Iceland, Israel, Jamaica, Liechtenstein, Mauritius, Montenegro, Norway, the Philippines, Serbia, Switzerland, Turkey, the United States of America or Macedonia.
Retiring to popular destinations like Canada, Australia, South Africa & New Zealand mean your pension won't be increased each passing year, as it would have done if you stayed in the UK.
I'm transgender, will this affect my state pension?
Your state pension might be affected if youíre transgender and you:
- Were born between 24 December 1919 and 3 April 1945
- Were claiming state pension before 4 April 2005
- Can provide evidence that your gender reassignment surgery took place before 4 April 2005
You donít need to do anything if you legally changed your gender and started claiming state pension on or after 4 April 2005 - youíll already be claiming based on your legally-recognised gender.
When do you get the state pension?
You qualify at the Government's official retirement age, which depends on when you were born, and your gender, though you needn't start taking the pension at that point.
The official retirement age is gradually being raised, so while many women currently get it at 62 and men at 65, in a few years, this will rise to at least 66 for both gender by 2020, and possibly to 68 in 2030s.
The state pension age for men and women
|Born||Official retirement age|
|Before 6 December 1953||65|
|On or after 6 December 1953||It will rise from 65 to 66 between December 2018 and April 2020|
|Before 6 April 1950||60|
|On or after 6 Apr 1950||The current state pension is increasing from 60 to 66 by April 2020.|
To find your exact retirement age see the Government's State Pension Age Calculator.
How much money will you get?
There's a complicated maze surrounding the amount you get, but here's a brief summary:
A single person in 2015/16 will get £115.95 a week of basic state pension - that's £6,029 a year.
If youíre married, and both you and your partner have built up the full number of state pension qualifying years, youíll get double that amount so £231.90 a week.
But, if you're married and your partner hasn't built up their own state pension, they'll still be able to claim a state pension based on your record. The maximum in this situation is £69.50 a week (meaning you will get up to £185.45 between you).
If you're on a low income, you can boost your basic state pension by claiming pension credit. This will take your income in 2015/16 up to £151.20 a week for a single person and £230.85 a week for a couple. For more info on pension credit, see the full Pension Credit guide.
But, there's another crucial fact to remember...
The basic state pension is taxable, but if you don't have any other income, you won't be taxed. You only start to pay tax if you earn more than £10,600 (the tax-free allowance for pensioners is slightly higher than those aged under 65).
If you defer your pension any lump sum income you take is taxed differently.
The figures above are only rough guides as many other variables affect the amount that you will get. You can try Gov.UK's calculator for an indication. The best way to find out is to ring 0800 731 7898 (option 1).
Will pension income affect my benefit entitlement?
Yes. A pension counts as if it was any other income so will affect your entitlement to pension credit, housing benefit or council tax support. See the Benefits Check-up guide.
Does my pension payment increase every year?
Yes. It rises every April. To try to be fair, there's a system called the 'triple lock'. This means that every April, the basic state pension amount increases by the highest of the previous September's inflation rate (based on the Consumer Prices Index), the increase in average earnings, or 2.5%.
Your pension may not increase every year if you retire to certain countries outside the UK.
What happens when I die?
Your basic state pension cannot be passed on to someone else when you die. Though if you delay claiming your state pension, your widow, widower or surviving civil partner may be entitled to some of the cash.
If you have contributed towards the second state pension, your spouse or civil partner can inherit some of this, though it depends on when you were born. If you've no spouse or civil partner, any state pension you put off claiming becomes part of your estate. There's more details on how this works on the Gov.UK website.
Your surviving partner may be entitled to a one-off bereavement payment or bereavement benefits for a year. You can see who is eligible for this at Gov.UK.
How can you boost your pension?
There are three ways you can boost the amount of state pension you'll receive, but all need to be considered carefully before deciding what to do.
Delay taking out your state pension
You can put off claiming your basic state pension. This can be especially useful if you're still working, as it means you'll get larger pension payments later. You can also defer receiving payments once you've already started claiming, though be careful, as you can only do this once.
If you choose not to take your pension straight away when you reach state pension age. There are two different ways you can take the benefit:
Choose a bigger pension later
For every five weeks you delay claiming, your future weekly allowance is increased by 1%. So delay for a year and you get the full pension plus 10.4% extra. Though the amount isn't compounded - so you don't get the increase on the increase.
If you reach state pension age on or after 6 April 2016 the rate drops to 5.8%, meaning the benefit is not so great.
Get it as a lump sum
As long as you've deferred for at least a year, and began to defer after 5 April 2005, you can choose a lump sum. This is made up of the deferred payment plus interest at 2% above the base rate (this time it's compounded). After collecting the lump sum, you then get the standard pension. Any lump sum payment cannot push you into a higher-tax bracket so will be taxed at the same rate as your other income.
Is it worth deferring to increase the payout?
The answer to this, unsurprisingly, isn't simple. It's sometimes worth deferring as you may get a larger overall payout. In general, the longer you live the more beneficial it becomes, so it's a decision you'll need to make based upon your circumstances and it's a bit of a gamble.
If you'd like to defer, contact the Pension Service on 0800 731 7898 (option 1).
How long am I likely to live?
There's no crystal ball that can tell you how long you'll live. However, according to the Office for National Statistics, a healthy 65-year-old man is expected to live, on average, for another 18 years and a 65-year-old woman is expected to live for another 21 years.
So the odds suggest that if you can afford to defer, you're probably better off doing so. Though, by definition, some always fall short of averages - putting it bluntly, you could die before you ever got any benefit.
But there's another flipside to consider - if you did take your pension early, without spending it, it'd be earning some interest in the bank (though with rates so low right now, that interest could be fairly negligible). It's important to carefully consider your options.
Buy more pension years
It's possible to pay to replace some missing NI qualifying years, or part years, which could mean a massive increase in your basic state pension payout.
For some, buying NI years now could mean more than £1,000 a year extra.
Before buying extra years, remember that the Government is discussing radical changes to the state pension to create a flat-rate payout. But it says those who pay to boost their pension will not lose out.
However, firm details of the transition arrangements for those affected by the increase in NI years are not available yet. We will update this guide once we know more.
A. How many NI years do you have?
This is the key that defines whether it's worth bothering. HMRC should send out notices to people with NI gaps.
If you haven't received one or can't find it, don't worry. You can check whether you have any gaps online by getting a State Pension Forecast or call the Future Pension Centre on 0845 3000 168 and it'll send you a statement.
Anyone with the full complement should already be getting the full basic state pension, so won't need to buy any more. The years needed for a full basic state pension are:
Men Women Retired pre-6 April 2010 44 39 Retired on or after 6 April 2010 30 30 Retiring on 6 April 2016 or after 35 35
If you've got fewer than the maximum, read on.
B. Do you qualify for pension credit?
If you donít have enough money to buy additional NI years and get the full state pension, this may be boosted when you apply for pension credit. All your money, including savings will be assessed, and if you donít have enough to buy extra NI years youíll be topped up to the full basic state pension and then get pension credit on top of that if youíre eligible. For full information on pension credit, see the Pension Credit guide.
If you are eligible, pension credit will usually top you up beyond the full basic state pension, so you don't have to buy extra NI years. If you're not (call 0800 99 1234 to find out), read on.
C. Could you be excluded from buying NI years?
There are some who may not be able to, or shouldn't, buy additional years.
Can't buy enough to hit the minimum?
If you have very few qualifying years and retired before April 2010, it may be you can't buy enough credits to hit the minimum. For instance, a man in that boat needs 11 years to get any state pension so if you can't reach that threshold by buying extra years, there is no point.
Pay reduced NI?
Married women sometimes pay less (known as the 'small stamp' or 'married women's stamp'). If you're in this boat, you can't replace any missing years where you paid reduced NI for the whole year.
Able to claim via partner's contributions?
If buying extra years won't beat the income you'd receive by claiming the couple's pension then don't do it.
If you try to buy further years that would take you over the maximum, you'll normally be prevented from doing so by the Government.
If none of these apply, find out how many years you can buy...
D. How many years can you buy?
If you're eligible, and you could benefit by boosting, it's time to get serious on the nitty-gritty. When buying extra years, you have to buy what are called class 3 NI contributions.
There are two categories of years you can buy, but they don't apply to everyone.
The previous six tax years, plus the year you're in
The quicker you are, the cheaper the price. If you buy within two years of the end of tax year you're purchasing, you pay that year's price, otherwise you'll pay today's price.
For example, if you had bought the full 2010-11 year before 5 April 2013 you'd have paid the 2009-10 price, which was approximately £626 for a full year. However, if you buy it now, you'll pay the 2015/16 price which is £733.20.
See full prices for each year.
Cost of buying additional NI years
NI Year Cost to buy now 2011-12 or before £733 2012/13 £733 2013/14 £705 2014/15 £723 2015/16 £733 Rounded to nearest pound. *In some cases, those who retire on or after 6 April 2010 get more time to pay at the rate for the year they're buying. Source: HMRC
Just retired or close to retirement?
Some people can buy an additional six years from 1975-76 to 2003/04, on top of the last six years. This only applies to those who have reached, or will reach, state pension age between 6 April 2008 and 5 April 2015.
To buy these extra years you must already have at least 20 qualifying years, and if you reach the official retirement age before 6 April 2010 you must generally have at least one year from paid employment.
You pay the rate for the year you're in when buying these years, currently £733.20 a year. You have six years from the date on which you reach pension age to pay.
State pensions are complex, and it's not easy to tell whether you'll be better off by buying extra years or not. We've built the Pension Boosting Calculator (below) to help you work it out.
State pension top-up
State pension top-up allows you to boost your pension by paying a new class of voluntary national insurance contributions called "class 3A".
The scheme opened on 12 October 2015 and is available until 5 April 2017 to all those who have reached state pension age by April 2016, including existing pensioners. The cost of the top-up is based on your age and average life expectancy.
So for a 65-year-old man, for example, an extra £1 of pension per week costs £890, but for a 75-year-old the contribution rate for the same amount of pension is £674.
For full information on whether this is a good option for you and how you can top-up, see the full state pension top-up guide.
The Pension Boosting Calculator
This calculator is designed to give you a rough idea of the worth of topping up extra years if you don't qualify for the full basic state pension. However, it does not work well on a mobile phone, so if you want to use it, please return to this guide on a desktop computer. Why not email yourself this link so you can look at it later?
This calculator is designed to give you a rough idea of the worth of topping up extra years if you don't qualify for the full basic state pension.
See it more as a rule of thumb than an accurate answer, as we've made a number of assumptions to make it simple to use.
From 2016, the Government has said there will be a flat rate pension, of at least £144 a week, for everyone retiring after 6 April 2016, provided that they have 35 qualifying years.
It says those who pay to boost their pension will not lose out. However, some of the details - such as how it affects those who have the 30 years needed for those retiring between 2010 and 2016, but don't have the extra five years - still need to be ironed out.
See the state pension reform MSE News story for more information.
As there are too many unknowns after 2016, please only use this calculator if you are due to retire before 6 April 2016.
The main assumption is you are an individual (this DOESN'T work for those claiming a couple's pension). We use the 2014/15 state pension amount (£113.10/week), but do not increase it for future years.
If, on the back of this calculation, it looks likely that you want to buy more years, then ...
Don't buy before first making additional checks.
We've worked hard to make this guide easy to understand and accurate. So please give us your feedback, include anything that doesn't make sense or tell us where more info's needed.
Big changes due for pensions in April 2016
If you reach state pension age on or after 6 April 2016, the way you get your state pension and how much youíll receive will be worked out differently.
The new state pension has been set at a flat rate of about £150 per week, per person.
Youíll be eligible to claim if youíre:
- A man born on or after 6 April 1951
- A woman born on or after 6 April 1953
As now, the amount you get is based on your national insurance (NI) record before 6 April 2016. Both men and women will need 35 qualifying years to be entitled to the full flat rate. But...
You might not get the full flat rate pension even if you have 35 years
Some won't get the full £150/week, even if they have 35 or more years of NI contributions. That's because under the proposed new system, people who have been in 'contracted out' pension schemes for any length of time will have their flat-rate pension reduced.
If you've been contracted out at any time, you will have been paying lower NI contributions and your employer will have received an NI rebate to fund your workplace pension.
This is complicated and the guide will be fully updated closer to the time with all the changes. In the meantime, you can get a state pension statement which can tell you how much state pension you may get.
I'm affected by the rule change, and only have 30 years of NI contributions. What do I get?
If you've only got 30 years' contributions and you're retiring on or after 6 April 2016, then you're not going to get the full amount of flat rate state pension. But you can buy the extra years you need and get a discount if you're affected.
You have up until 5 April 2023 to make payments. If you make contributions after 5 April 2019 you may pay higher rates. Again, this is complicated and we'll have more on this when we fully update the guide.