What is the state pension?
In April 2016, the Government introduced a new State Pension to replace the previous system.
What happens to your basic State Pension?
Your basic State Pension is paid only to you and can’t be passed on to someone else when you die. If you have contributed towards an additional State Pension your spouse or civil partner may get some of this.
If your spouse or civil partner is under State Pension age when you die, any State Pension based on your qualifying years of entitlement will be added to their State Pension when they claim it. For this to happen they can’t have remarried or formed a new civil partnership by the time they reach State Pension age.
If you’ve deferred your State Pension and you die, your spouse or civil partner may be able to claim an additional State Pension or a lump sum.
Read more about what happens to your basic State Pension on death
The new State Pension
This new State Pension only applies to men born on or after 6 April 1951 and women born on or after 6 April 1953. The new State Pension will be £203.85* per week in tax year 2023/24. To claim any new State Pension you will need to have made National Insurance contributions (NICs) for at least 10 years.
*This is the full amount based on having at least 35 'qualifying years' of NICs.
To see how much you’re currently due to get, use the Government’s State Pension Calculator
The new State Pension is the main source of retirement income for a lot of people in the UK. It is a guaranteed income that’s paid by the Government. You’re eligible to get your new State Pension once you reach State Pension age. If you don’t want to start taking it, then you can choose to defer receiving the payments to a later date (see below).
Read more about the new State Pension
Who is eligible for the new State Pension?
You’re eligible for the new State Pension if you’ve paid, or been credited with, NICs which some may also know as their 'Stamp'. In the past there have been different categories of NICs which is why the State Pension can be confusing.
If you are or were employed, your NICs are deducted from your salary. These are paid directly to the Government, along with your employer’s contributions. If you are or were self-employed it’s your responsibility to pay your NICs, which are classed differently.
In the past the rules were different for men and women. To find out more about how much you can expect to get from your new State Pension, you can ask for a forecast by applying online at:
www.gov.uk/state-pension-statement
When will you get your new State Pension?
State Pension age varies depending on when you were born but is expected to increase gradually to 68 by mid-2040. To find out when you’ll be entitled to collect your new State Pension, use the Government’s State Pension calculator.
You have to claim your State Pension
You don’t get your new State Pension automatically, you need to claim it. You should get a letter four months before you reach State Pension age telling you what to do. So, if you’ve not been contacted about claiming it three months before, call the State Pension claim line on 0800 731 7898.
Inflation and the State Pension
The State Pension increases by at least 2.5% a year. But if prices (as curently measured by the Consumer Price Index (CPI)) or earnings (the average percentage growth in UK wages) go up more than this then your pension will go up in line with the highest. This is known as ‘The Triple Lock’.
Tax on State Pensions
HM Revenue and Customs (HMRC) see your State Pension as an income, although you do not pay tax on it directly. If your yearly income goes over your personal allowance (the amount of income you can receive in a tax year before you start paying income tax – the standard personal allowance is £12,570 in tax year 2023/24), the tax due will be taken from any additional income you receive and paid according to the tax bracket you fall into.
Deferring your 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 and choose one of these options. If you defer, your new State Pension will increase by 1%2 for every nine weeks, that’s 5.8%2 for every 52 weeks.
2 These figures do not take into account a rise or fall in inflation rates.
Here’s how it works
If you deferred a new State Pension of £203.85 a week this is how much you would get.
| YEARS DEFERRED: | YOUR £203.85 NEW STATE PENSION BECOMES: |
|---|---|
| 1 | £215.67 |
| 3 | £241.41 |
| 5 | £270.23 |
No deferral limit
You can defer the payment of your new State Pension for as long as you want, as currently there are no deferral time limits.
State benefits during retirement
As well as the State Pension you could qualify for other benefits. Some of them depend on your age, others on your income. Together they can go a long way towards meeting the cost of living.
Health benefits
- free NHS prescriptions for over 60s
- free NHS eye test for over 60s
- winter fuel payment, if you were born before 26 September 1956.
Plus, if you already receive benefits such as Pension Credit, you could get more support towards your health costs.
Pension Credit
If you’ve reached State Pension age and have a low income, you could claim Pension Credits to top-up your weekly income to £201.053 if you are single and £306.853 if you are a couple.
Claiming Pension Credit also opens up other State benefits.
For your health:
- free NHS dental treatment
- help towards the cost of glasses
- help with hospital travel costs
- a Cold Weather Payment of £25 when the temperature is 0°C or below for seven days in a row.
For your home:
- lower or no Council Tax if you live alone
- your rent paid in full by Housing Benefit
- help with mortgage interest, ground rent and service charges.
If you’re a carer:
- a Carer Premium worth up to £69.704 a week.
Any one of these could really help with your living costs, so they’re worth looking into.
3 Figures taken from GOV.UK
4 Figure taken from GOV.UK
Means tested benefits
Taking a lump sum from your pension pot can affect any means-tested benefits you may be receiving, they could stop or reduce.
Make sure you check to see if taking your pension alters your benefit situation. Visit Pension Wise for more information.