State Pensions: What, When And How Do You Get It?

When it comes to planning for your retirement, it’s important you’re up to speed on what money you’ll have, where it’ll come from, and when you can get at it. And for many of us, our state pension accounts for a significant chunk of the money we hope to have at our disposal when we retire. But, what is it? When do you start receiving it, how, and perhaps most importantly, how much will you get? Let’s find out.

What is the state pension?

State pension is a pension that’s paid to you by the government when you reach a certain age. There are currently two types of state pension in operation, and which one you will receive depends on when you were born.

The basic state pension is the “old-style” pension system that’s available to men born before 6^th April 1951, and women born before 6^th April 1953. It’s also available to those who reached state pension age – which at the time was 65 for men and 60 for women – before 6^th April 2016. Most people eligible to claim their pension under this system will already have retired and be receiving their pension.

The new state pension is the one that most people in the UK will receive as and when they retire. Unless, of course, another new system is introduced between now and whenever you retire! It’s available to men born on or after 6^th April 1951, and women born on or after 6^th April 1953. Some people born close to those dates may already be receiving their new-style state pension, but most of us can look forward to receiving it in the future.

When can you start getting your state pension?

You can get your state pension when you reach state pension age. Currently, this is set at 66 years old for both men and women. But, it’s set to rise to 67 years old in the next few years, and may rise again before many of us reach that age!

There being a set state pension age doesn’t mean that you can’t retire earlier if you wish to. But, you will need another way of funding your retirement until you’re able to claim your state pension. Equally, you don’t have to retire once you reach state pension age if you want to keep working. You can opt to defer receiving your state pension, and claim it once you decide to stop working.

How much is the state pension?

For the 2021-22 tax year, the full new-style state pension amount is £179.60 per week, per person. But, state pension is set on an annual basis and increases every year to account for inflation. The amount state pension is increased by each year is currently whichever is the highest of these three things:

• 5%
• The percentage by which wages have increased (in the UK)
• The percentage by which prices on things we buy have gone up, according to the Consumer Price Index

So, by the time you retire, there’s a chance that your state pension will be higher than it is now. But, it’s value will be the same in terms of what you can buy with that money.

Whether you’re able to receive the full state pension amount depends on how many years of National Insurance contributions you’ve made throughout your working life. With the new style state pension, you’ll need 35 years’ worth of National Insurance contributions to qualify for the full amount. If you have less than 35 years of National Insurance contributions, then you may still be eligible to receive some state pension, just not the full amount.

If you choose to delay taking your state pension, then how much you receive will increase proportionately as the pension you’re entitled to will be held for you to claim later. Currently, if you delay taking your state pension for a year, then the amount you receive will increase by a little under 5.8%.

Will you get your state pension automatically?

No. You will become eligible automatically, but you will need to submit a claim and payment details in order to start receiving your state pension money. A couple of months before your birthday the year you reach state pension age, you will receive a pack that lets you know what your state pension entitlement is and how to claim it. If you forget or don’t receive your pack, there’s no guarantee that you’ll be able to be paid all of the pension money you’ve missed out on, and if it’s been over a year since . So, it pays, literally, to keep on top of when you can claim, and have a reminder of some sort set!

Is state pension enough to live on?

If you’re eligible for the full state pension, it’ll give you £9,339.20 per year. This should be enough to cover a good portion of your essential expenses, and many people live entirely on their state pension. But, it’s provided by the state and, however unlikely it may be, a future government could decide to review, slash or even abolish the state pension. So, it’s wise not to depend on it entirely to fund your retirement.

Even if it stays as it is, though, the state pension doesn’t leave a lot of room for fun spending on holidays and indulging hobbies that most people look forward to in their retirement. So, if you can contribute to a private personal pension, either through a workplace scheme or off your own back, then it all helps to top up the money you have to live on once you stop working, and make your retirement that bit more enjoyable.