STATE pension payments provide an essential income for millions of retired people.
From your late-60s, you’ll start to receive your state pension – but how much is it?
1
The government changed how the state pension system works in April 2016 to try to make it more simple – and suspended the triple lock last year.
The state pension is a weekly payment from the government to men and women aged over 66.
It’s intended to give anyone a retirement income to support them as they get older.
You can spend the money as you wish, but it is treated as income so you may have to pay tax on it if all your earnings are above the annual personal tax allowance, currently £12,570.
The age when receipt begins is due to rise to 67 by 2028 and 68 by the end of 2046.
The government had planned to bring this forward but those plans were delayed on March 30 this year due to falling life expectancy in the UK.
The state pension is different to your workplace or a private pension and the aim is that all of these should provide a retirement income for you.
How much is the state pension?
The maximum amount you can get is currently £185.15 but that’ll increase by £18.70 from April this year, going up to £204 a week.
Most read in Money
While the old, or basic state pension, will go up £14.35 from £141.85 per week to £156.20.
Over the year, that would be an increase of £746.20 to £8,122.40 in total.
How do you qualify for the state pension?
The full state pension is only paid to those with a minimum 35 years of national insurance contributions.
This is one of the taxes you pay while working and builds up your entitlement to the state pension.
There may be gaps if you were unemployed, lived abroad or took time off to care for children or relatives, which means you could get a lower amount.
But in some cases, you can apply for credits to top up your retirement fund.
You need at least ten years of qualifying national insurance contributions to get any state pension payments.
This doesn’t have to be from ten years working in a row.
You can build up your eligibility as long as you have paid national insurance contributions for the equivalent of a decade during your working life.
It is possible to make voluntary national insurance contributions to top up your record, usually from the previous six years.
You can use a government tool to find out how many years of contributions you have and how much state pension you’re likely to get.
How is the state pension calculated?
Your national insurance record is just one factor in how much state pension you will receive.
Under the old triple lock system, pension payments increased at the start of the tax year in April by the highest of average wages, the consumer prices index (CPI) during the previous September or 2.5%.
It has since been replaced by a double lock promise of the higher of 2.5% or the September inflation rate.
A huge state pensions payment error means thousands were underpaid up to £128,000 – here’s how to find out if you can claim cash.
We spoke to a pensions expert who advised Brits how they can retire at 55.
And here are five pensions changes to keep in mind this year.
When can you claim?
You have to reach a certain age before you can claim your state pension.
On October 6 2020 the pension age for men and women rose to 66, up from 65.
For some women, this will be six years after they were originally told they would be able to claim their retirement fund aged 60.
How do I get paid?
It’s worth remembering you don’t get your state pension automatically, you have to claim it.
Before you turn the eligible age to start receiving your pension you’ll be sent a pack in the post from the DWP.
If you haven’t, you need to contact the department on 0800 731 7898.
You then can claim it by either:
But you can also defer your pension payments – the way you do this is by just leaving it unclaimed until you’re ready to get it.
By leaving your state pension untouched, it will boost the amount you eventually get.
You’re usually paid every four weeks into an account of your choice.
You’re paid “in arrears”, which means you’re paid for the last four weeks, not for the coming four weeks.
When will my state pension be paid?
The day of the week when you receive your state pension varies depending on your National Insurance number.
So if your last two digits are 00 to 19 you’ll be paid on a Monday, 20 to 39 and it’s Tuesday, 40 to 59 and it’s Wednesday, 60 to 79 and it’s Thursday, and 80 to 99 is on a Friday.
Why are some not paid the full state pension?
Millions of pensioners were left in “total confusion” thanks to a “contracting out” scheme – which means they no longer qualify for a full state pension.
These people will be on the old basic state pension.
They paid a lower rate of NICs while working in exchange for a higher private pension and as such this will have reduced their state pension.
This was more likely to happen if you worked in the public sector.
Contracting out ended in April 2016, but some pensioners are now claiming this happened without their knowledge – meaning they were unable to properly plan for the future.
To check if you were contracted out check old payslips or speak to your employer.
How to request a state pension forecast
As the state system can be tricky to navigate, a key part of any pension planning involves requesting a state pension forecast.
This will help you get your head around how much you could be eligible to receive, and from what age.
More than 150,000 pensioners are missing out on a £5,000 retirement boost – here’s how to claim.
Here are 12 pensioner benefits that are going unclaimed including heating help and council tax reductions.
Martin Lewis explains how unpaid carers can claim thousands of pounds towards their pension.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
