Whether you’re welcoming retirement or still in denial, it’s time to answer the big question ‘what is the state pension?’
It’s something most people have heard of but don’t actually understand what they’re entitled to.
Knowing the ins and outs of the state pension will give you peace of mind over your finances in later life.
This article will answer your worries over ‘what is the state pension’, and cover everything you need to know.
Here’s a summary of what we’ll cover:
- Your state pension is a regular payment you get when you reach retirement age.
- You don’t have to stop working when you reach retirement age, but the state pension gives you something to fall back on.
- You can also choose to withdraw your pension pot at a later date, so you can save it for the future.
- Most people are entitled to a state pension, but other pension schemes are available if you’re looking for options.
What is the state pension?
The basic state pension is a regular payment that you can claim when you reach pension age.
It’s based on National Insurance contributions that you’ve paid over the years and can help support you during retirement.
So, your state pension will vary depending on your national insurance record.
Still wondering when can I retire? This guide has the answers to your questions about state pension age.
The New State Pension
If you reach pension age after the 5th of April 2016, you’ll receive the new state pension.
This generally applies to men born after 1951 and women born after 1953.
You can receive £203.85 a week on the new state pension and £156.20 a week on the basic state pension.
The only main difference between the basic pension and the new state pension is the pension rate.
How can I check my state pension age?
There is no longer a forced retirement age of 65, so you can continue working as long as you feel able to.
The best way to check at what age you’ll be eligible is through GOV.UK.
This is a handy tool, especially as the retirement age for women and men will increase again in the future.
Where does the pension money come from?
The state pension is money set aside for you to retire, thanks to your national insurance contributions.
National insurance is deducted from your earnings over the course of your working life and paid to HMRC.
You need a minimum of 10 years of national insurance contributions or credit to qualify.
Having gaps within your national insurance contributions can affect your entitlement.
National insurance credits
It can be a worry if you’ve had periods of not working (and not paying NI) due to illness or unemployment.
However, if you’ve been claiming benefits because of these situations, there won’t necessarily be gaps in your record.
Thanks to the credits awarded that show you have a valid reason for not paying national insurance.
If you have had periods out of work due to caring for elderly parents at home, you may have claimed a carer’s credit.
Claiming it while caring for someone means that gaps in your contributions won’t affect your pension eligibility.
While this is different from the Carer’s Allowance benefit, you must be providing care for at least 20 hours a week.
How to claim your state pension
When you’re approaching state pension age, you should receive a letter from the pension service.
This will tell you how to apply, so you don’t need to worry about missing out.
If you haven’t received a letter within this time frame, it’s best to phone the pension service and ask to claim your pension.
You will need your national insurance number and date of birth to claim your pension.
What will I get?
In 2024, the new pension rate is £203.85 per week, though this is likely to change next year.
This can vary if you have gaps within your employment history or gaps within your national insurance contributions.
Your pension can also increase if you have deferred it for at least 5 weeks.
However, if you are on certain financial benefits for the elderly, you won’t be eligible for an increase.
What are the limitations of the state pension?
While state pension payments are always welcome, many find that it cannot cover retirement costs fully.
One positive about the state pension is that you can increase it by deferring, and continue working whilst you withdraw it.
This means you can have additional income alongside your pension pot, so you can increase your retirement fund.
But it’s good to see both sides of the state pension, so you can get a better understanding of how it can work for you.
Pros and cons of the state pension
- Gives you a regular income for life
- Increase by deferring your pension
- Can partially fund retirement
- Unreliable and might not be enough
- More flexibility in a private pension
- Limits the use of some benefits
If you’re worried about your finances in retirement, please speak to a financial adviser.
Are there other pension schemes?
With so many pension schemes available, many opt for having more than one pension on the go.
A workplace or a stakeholder pension can also get you thinking about what type of pension scheme is right for you.
Using other schemes alongside the state pension will give you more income, so it’s great to keep your options open.
If you think you have a missing pension out there, use a pension tracing service to help you locate what you are owed.
What is a workplace pension scheme?
A workplace pension is arranged by the employer and is automatically deducted from your paycheck.
It’s also known as a defined benefit pension and is based on your salary and how long you’ve been employed.
Benefits after state pension age
There are many benefits you can get after state pension age, all of which can help you live more easily.
Pension credit is one of the most common credit schemes you can apply for.
There is also the attendance allowance which can get you additional credit or reductions on these benefits.
You can also get help with cold weather, fuel costs, and healthcare if you are over pension age.
Pension credit is a top-up that can give some extra income.
To get pension credit, you need to be of pension age and on low income.
You will get a weekly income of £201.05 if you are single, and £306.85 if you have a partner.
Other benefits might be available to you if you are on pension credit.
This type of allowance is for anyone with an illness or disability who requires support.
You must have a physical or mental disability and be of state pension age or older to qualify.
The allowance is paid at two different rates, so you could receive £68.10 or £101.75 a week, depending on your circumstances.
If you care for someone who claims this, you might be asking can I claim carers allowance for myself?
Are there other benefits for pensioners?
There are a number of useful benefits for pensioners over 70.
- Housing benefits if you rent
- Council tax discount
- Free TV licence for over 75s
- Help with NHS dental
- Warm home discount scheme
If you found this guide useful then you might like to check out these guides on:
- NHS Continuing Healthcare: Find out if you are entitled
- Attendance allowance pitfalls: how to avoid them
- Inheritance tax threshold: Everything you need to know
Getting your care sorted
Are you caring for a family member or friend, but feel like you can’t cope?
Sweet Pea can take the weight off your shoulders by helping you find the right care for your loved one in minutes.
With just a few details, you can start a care request today and get matched with local carers in your area.
Sign up today to get the care you need.