How Much is a State Pension?

The State Pension is a regular payment from the UK government that you can claim when you reach State Pension age. It is an essential source of income for many retirees, providing financial support in later life. However, the amount you receive depends on various factors, including your National Insurance (NI) contributions and the specific type of State Pension you qualify for.

Types of State Pension

There are two main types of State Pension in the UK: the Basic State Pension and the New State Pension. The type you receive depends on when you reached State Pension age.

1. Basic State Pension

The Basic State Pension applies to people who reached State Pension age before 6 April 2016. To qualify for the full Basic State Pension, you need to have made 30 years of NI contributions or have been credited with them. If you have fewer years, you will receive a reduced amount.

For the 2024/2025 tax year, the full Basic State Pension is £156.20 per week. If you have fewer than 30 years of contributions, the amount you receive will be proportionately less.

2. New State Pension

The New State Pension applies to people who reached State Pension age on or after 6 April 2016. The amount you receive under the New State Pension depends on your NI record. To get the full amount, you need to have 35 qualifying years of NI contributions.

For the 2024/2025 tax year, the full New State Pension is £221.20 per week. If you have fewer than 35 years of contributions, the amount you receive will be lower, but you need at least 10 qualifying years to get any State Pension at all.

How National Insurance Contributions Affect Your State Pension

Your NI contributions are crucial in determining how much State Pension you will receive. Here’s how it works:

• Basic State Pension: You need 30 qualifying years to get the full amount. A qualifying year is one in which you either worked and paid NI contributions or received NI credits. If you have fewer than 30 years, your pension will be reduced proportionally.

• New State Pension: You need 35 qualifying years to get the full amount. Like the Basic State Pension, each year of contributions or credits counts towards your entitlement. If you have between 10 and 35 years, you will receive a proportion of the full amount.

It’s also possible to fill gaps in your NI record by making voluntary contributions. This can be especially useful if you’re close to retirement but find that you don’t have enough qualifying years to receive the full State Pension.

How to Check Your State Pension Forecast

You can check your State Pension forecast to see how much you’re likely to receive based on your current NI record. This service is available online through the UK government’s website. It’s a good idea to check your forecast regularly, especially if you’re approaching retirement age, as it gives you time to address any gaps in your NI record.

Additional State Pension (SERPS and S2P)

In addition to the Basic State Pension, some people may also receive an Additional State Pension. This applies to those who were part of the State Earnings-Related Pension Scheme (SERPS) or the State Second Pension (S2P) before 6 April 2016.

The amount you receive from these schemes depends on your earnings and the NI contributions you made during the years you were in the scheme. The Additional State Pension is automatically included in your State Pension payments if you qualify.

State Pension Increases

The State Pension increases every year under the Triple Lock Guarantee. This guarantee ensures that the State Pension increases by the highest of the following three measures:

1. Inflation – as measured by the Consumer Prices Index (CPI).

2. Average Earnings Growth – the rise in average earnings across the UK.

3. 2.5% – a guaranteed minimum increase.

This means that your State Pension should keep up with the cost of living and help you maintain your standard of living in retirement.

How to Claim Your State Pension

When you reach State Pension age, you won’t automatically start receiving payments. Instead, you’ll need to claim your State Pension. You can do this online, by phone, or by post. It’s advisable to start the process about four months before you reach State Pension age to ensure you receive your first payment on time.

Deferring Your State Pension

You can choose to defer claiming your State Pension, which could result in you receiving a higher weekly amount when you do start claiming it. The amount your pension increases depends on how long you defer:

• For the Basic State Pension: Your pension increases by 1% for every 5 weeks you defer, which works out to about a 10.4% increase for every year.

• For the New State Pension: Your pension increases by 1% for every 9 weeks you defer, or just under 5.8% for every year.

It’s important to weigh the benefits of deferring your pension against the fact that you won’t receive payments during the deferral period.

Conclusion

The State Pension is a vital source of income for many people in retirement, but the amount you receive can vary significantly based on your National Insurance record and whether you’re entitled to the Basic State Pension or the New State Pension. By understanding how the State Pension works, checking your pension forecast, and considering whether to defer your claim, you can make informed decisions to maximise your income in retirement. If you’re unsure about your entitlements or how to optimise your pension, seeking advice from a financial adviser can be a wise step.

Other Articles

What is State Pension?

What is UK Pension Age?

What is Workplace Pension?

Can I Cash in my Workplace Pension at 55?

Can I Change my Workplace Pension Provider?

Can I Have a SIPP and a Workplace Pension?

Can you Inherit a Pension?

How Do I Claim My Workplace Pension?

How Much is State Pension?

How to Claim Higher Rate Relief on Pension Contributions

Is State Pension Taxable?

What Happens to My Pension When I Die?

When Did Workplace Pensions Start?

When Will I Get My State Pension?