Your State Pension has changed - here's what you need to know
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The State Pension has changed – including how much you can get and what age you can claim it. Knowing what to expect can be an important part of planning for life after work, so here’s what you need to know.
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There has been a State Pension in the UK for more than a century and what you get, when you get it and how you claim it has changed many times over the years.
The latest changes came in at the start of the 2021-22 tax year on 6 April. Our guide can keep you up to date if you’re currently receiving the State Pension, and help you understand the role a State Pension can play in your future income if you haven’t yet retired.
State Pension rises this tax year
On 6 April there was a 2.5% rise in the State Pension. This will affect how much State Pension you receive whether you’re eligible for the new flat-rate State Pension, which was introduced in April 2016, or the older basic State Pension.
If you get the older basic State Pension, the full amount will increase to £137.60 a week and is based on 30 years of National Insurance (NI) contributions (more on this below). You can claim the basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953.
If you were born later, you can claim the new State Pension instead. It rises by £4.40 to £179.60 a week – that’s £228.80 extra a year. This is based on you having paid or been credited with 35 years of NI contributions, so not everyone will receive the full amount.
Visit the government website for more details on who can claim the new State Pension and the basic State Pension.
How much State Pension am I likely to get?
The amount of State Pension you receive is based on the number of years of NI contributions you have paid or been credited with and when you start claiming it.
More than 20 million people have checked their NI record and State Pension forecast online. It’s easy to do at www.gov.uk/check-state-pension.
Can I make up for any missing years of NI contributions?
Gaps in your work history or being in certain types of pension schemes can mean you won’t have enough NI contributions to receive the full State Pension. But you may get NI credits for years when you’re not employed or have low earnings.
And, in some cases, claiming benefits such as jobseeker’s allowance can actually help you build and protect your State Pension entitlement.
In some cases you might be able to top up your NI record by paying voluntary contributions.
You’ll find more detail at www.gov.uk/check-national-insurance-record.
How registering for child benefit can help your State Pension
Thousands of people may be losing out on some of their State Pension because they opted out of receiving child benefit. In many cases, parents thought a tax charge affecting those earning more than £50,000 would cancel out the benefit.
But registering for child benefit, even if you choose not to claim it, or end up having to pay some or all of it back through the tax charge, can help you build your State Pension through NI credits. You can visit Gov.UK to make a claim or use the Child Benefit tax calculator for more information.
Another little-known fact is that working-age grandparents who care for grandchildren under 12 can get NI credits to top up their State Pension. This was updated last year to include care via telephone or video to account for the effect the coronavirus pandemic may have had on grandparents’ ability to care for their grandchildren in person. You can find out more about NI credits and how to apply at Gov.uk
Bear in mind that tax and legislation may change and your personal circumstances, and where you live in the UK, also have an impact on your tax treatment.
At what age will I get the State Pension?
The current State Pension rose to 66 last year, and that’s due to continue rising in line with this government timetable. It will rise again to 67 between 2026 and 2028 and is expected to rise further in the future.
Modern, flexible workplace and personal pension plans normally let you start taking your money from the age of 55, rising to 57 in 2028. So you could access your benefits before you receive your State Pension.
You can check your State Pension age here.
Is the State Pension likely to be enough?
Probably not. At under £9,400 a year, the full State Pension is a lot less than a minimum wage salary.
The reality is there’s a significant gap between what you get from the State Pension and what you may actually need or want in retirement. The State Pension alone will only cover a very basic lifestyle and, because it only starts in your late 60s, won’t help to support you if you want to retire earlier. So it should only be a part of your overall retirement plan.
And it’s also why it’s so important to fully understand how much you need to save into your personal or workplace pension plan to be able to afford the retirement you want.
Our pension calculator can help you see if you’re on track for this.
Are there likely to be any further changes to the State Pension?
One change that has been widely talked about in recent years is how increases to the State Pension are made.
Currently, increases to the State Pension have been based on something known as the ‘triple lock’. This was to make sure that its value wasn’t negatively affected by rises in inflation. In practice, what this means is that the State Pension increases by the highest of the following:
• the average percentage increase in UK earnings
• the percentage increase in the cost of living, measured by the Consumer Prices Index (CPI)
• 2.5%
So, for example, if average earnings increased by 3%, but the cost of living rose by only 2%, then the State Pension would increase by 3%.
Similarly, if both average earnings and the CPI increased by less than 2.5%, the State Pension would still rise by 2.5%.
There were no changes to the ‘triple lock’ announced in the March 2021 Budget. However, it could be considered again in future, particularly with the expectation that measures will be required to help the country’s economy recover post-pandemic.
What can I do to make sure that I have enough money when I retire?
Firstly, get informed so that you know what you’re likely to get from your State Pension, and when. And bear in mind that you might be able to top up your NI contributions to get more.
Secondly, think about taking steps to boost the money you’ll get from your personal or workplace pension plan by increasing your contributions. Some employers also offer matching schemes, so doing this could mean your employer will pay in more too. You can find more information in our Pension guides.
Don’t forget that you can also use savings such as ISAs (Individual Savings Accounts) to supplement the money you’ll get from any pension plans you have and the State Pension.
Remember that pension plans, as well as some types of ISAs, are investments and their value can go down as well as up and may be worth less than what was paid in.
It’s a good idea to regularly review your personal or workplace pension plan to make sure it’s on track. If you’re a Standard Life customer, you can do this through our online services. And if you want a full picture of all your pension plans, as well as your potential State Pension entitlement, use our simple pension calculator.
The information here is based on our understanding in April 2021 and shouldn’t be taken as financial advice.
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