YOUR state pension is a valuable benefit that helps to make sure you have a comfortable retirement.
This year, the full state pension is worth £221.20 a week. Over 12 months, that adds up to £11,502.40.
Typically, this goes up each year by the highest of either the rate of inflation, average earnings or 2.5%. This is called the “triple lock” guarantee.
Your state pension age, which determines how old you need to be to access the money, depends on when you were born.
Currently, people can start to receive their state pension once they turn 66, but this rises to 67 for people born after April 1960, and 68 for those born after April 1977.
These ages are set to be reviewed by the government, so some people could find that they get their state pension even later.
If you want to know exactly what your state pension age is, the government has a helpful tool that will tell you.
All you need to do is enter your date of birth and you’ll be told your state pension age, the date you can access Pension Credit (if you qualify), and at what age you’ll get a free bus pass.
It’s important to remember that you don’t have to stop working when your state pension kicks in. If you want to, you can continue in employment and still receive the money.
If you do carry on working, you can also choose to defer your state pension, in return for a higher payment. You’ll need to defer by more than nine weeks to see a difference.
Your payout increases by the equivalent of 1% for every nine weeks you defer. This works out as just under 5.8% for every year.
To qualify for the new state pension, you need to have paid enough National Insurance (NI) contributions or credits.
You need at least ten years on your record to get any payments at all. To get the full amount, you usually need 35 years’ worth of contributions.
If you have gaps on your record, you can choose to buy the missing years to boost your state pension payments.
To find out whether you’re on track to get the full state pension, you can check your forecast on gov.uk.
You’ll need to sign in through the government gateway. If you’ve already got an account, use those details, otherwise you might need to set one up.
Everyone reaching retirement age now can only qualify for the new state pension, which follows the rules outlined above.
But if you are either a man who was born before 6 April 1951 or a woman who was born before 6 April 1953, you’ll get something called the basic state pension, and you might also get additional state pension.
You can read more about the basic state pension on the government’s website.
Even though the state pension doesn’t kick in till you’re in your sixties, private and workplace pensions are usually accessible much earlier.
Currently, most people can access this money from 55, but this is rising to 57 from 2028.
At this point, you have several options available to you, each with its own tax implications.
You can buy an annuity, which provides a guaranteed income for life, but means you usually can’t pass on the money when you die.
You can leave the money invested and take income when you need it. Or finally, you can take the whole pot as cash (though you might end up with a hefty tax bill this way).
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
Retirement income
There are lots of calculators online that will help you calculate how much you’ll have to retire on based on your current pot size and how much you plan to save in the future.
Moneyhelper.org.uk is a free impartial resource that lets you see how much income you’re likely to have, including any final salary pensions you have and other savings.
Its nifty calculator lets you move levers changing your retirement age, contributions and target income to see how different decisions will impact the money you will have to live on.
If the calculator suggests you won’t have enough income, you can see whether retiring later, increasing contributions now, or both will get you to your goal.
How much money you’ll need
If you’re struggling to work out how much money you’ll need when you retire, there are calculators that can help with that too.
For instance, Smart Pension has built a calculator based on the latest Retirement Living Standards research.
You simply plug in where you live, whether you’re single, and whether you need a minimum, moderate or comfortable standard of living, and it tells you what annual income you need.
HSBC has a similar tool that goes a step further. It asks about things like whether you’ll want a car and how many holidays you’d like each year to help you determine which of the three standards is best suited to you.
From there, you can also enter details about your currents savings and planned contributions, and it will tell you how close you are to that goal.
You can then make changes to your desired income, planned retirement age, and savings rate to see how that changes things.
Tax calculator
When you’re retired, you still pay income tax. The level you pay at is determined by your income, just like when you’re working.
Put simply, the more you draw from your pension each year, the more income tax you’ll pay.
However, pensions are slightly more complicated, because 25% of your pot can be drawn tax-free.
Some people choose to take that tax-free lump sum up front. Or alternatively, you can ensure that 25% of everything you take over your whole retirement is tax-free.
If you want to understand how much tax you would pay on a pension withdrawal, this calculator from Aviva can help.
Drawdown calculator
If you opt to leave your pension invested and take an income (also known as drawdown), it’s important to understand how long your money will last and how much you can afford to take out each year.
This calculator from Hargreaves Lansdown allows you to put in your age, your retirement pot, and the monthly pre-tax income that you want, and it tells you how long your money will last.
It pre-populates with its own investment charges, but you can tweak these to match what your provider charges.
It also only allows you to use the calculator if you’re over 55, but if you want to get an idea based on your projected pot, you can just put in a date of birth that makes you the retirement age you want.
Financial Wellbeing
Your mid-life years, when you’re often balancing paying off a mortgage, raising children and saving or a pension can be hectic.
The Open University has teamed up with Legal & General to create a Midlife MOT that helps you with your finances and wellbeing check-ups. Check the website for details.
It says that after completing the course you will be able to:
YOU can start your application up to four months before you reach state pension age.
Applications for pension credit can be made on the government website or by ringing the pension credit claim line on 0800 99 1234.
You can get a friend or family member to ring for you, but you’ll need to be with them when they do.
You’ll need the following information about you and your partner if you have one:
If you claim after you reach pension age, you can backdate your claim for up to three months.
