0800 140 4644
Whether or not you can receive a State Pension in the UK depends on a number of factors, such as your age and how many years of National Insurance (NI) you have paid.
Both men and woman are entitled to a State Pension when they turn 66. But there are plans to increase this to 67-years of age from May 6, 2026. This will apply to everyone born on or after April 1960. But it doesn’t stop there. In 2037, the government says, the pension age will increase to 68-years (although there are rumours this increase may actually occur earlier than planned ie in 2033). Regardless of when they take place the government says the increases are due to the fact that more people are living longer.
As we mentioned, a State Pension isn’t automatic on age. For instance, you will only receive this income if you have paid at least 10 years of NI contributions over your working lifetime. And, to be entitled to the full pension, you must have at least 35 years of NI payments. Less than this and you will receive, what is deemed, a ‘part pension.’
Everyone aged 16 and over, who is employed and earning more than £242 a week, pays NI. So too does a self-employed individual with an annual income of more than £6,725.
It’s possible to get NI credits if you can’t work because you’re ill, caring for someone else or a parent looking after kids.
If you’ve had a period of unemployment, taken a career break or have been freelance and may have missed NI payments then it’s often possible to ‘buy back’ those years when you paid no NI.
What exactly is the State Pension?
The reason NI payments are so crucial to the State Payment is because this is what makes up the ‘pension pot.’ Your pension is then paid to you by the government on a regular basis, usually every fortnight or monthly, paid into your bank account. The amount you receive will increase every year as the State Pension attempts to keep up with the economy as a whole.
How much State Pension will I receive?
If you’re entitled to the full State Pension then you will receive £203.85 a week in 2023. That’s a weekly jump of around £18 (or around 10 per cent) from the previous year.
How to calculate your State Pension
Had quite a number of jobs over your lifetime (which isn’t unusual these days), coupled with periods of ‘time out’ and freelance work? If so, then you may be unsure of exactly how many years of NI contributions you’ve made. This is easy to check – and it’s quick. Simply go to the UK government website here and it will forecast your pension for you. Before you can do this though you will need your government gateway number first.
How to ‘top up’ your NI contributions
Once you have accessed the forecast you’ll see how much NI you have paid on a yearly basis. The site also highlights the years where no NI contributions were made, together with the lump sum you need to pay to ‘bring that year back up-to-date’ so that it counts towards your total NI years.
Voluntary contributions. Paying off a lump sum is referred to as ‘topping up’ or making ‘voluntary contributions.’ Doing so makes sense if you’re nearing pension age and don’t have enough years of NI to qualify, or paying for additional years will give you the maximum pension entitlement. You won’t be able to pay back all years, just the more recent ones.
Pension postponement. Those who reached pension age in April 2016 could defer taking it. For every nine weeks deferred the pension increases by one per cent. That means, for every year you put off receiving the pension, it increases by around 5.8 per cent. This can prove a good idea if you continue to work on. In this case you won’t pay NI, but any earnings would still be subject to tax.
Spouse contributions. Those on the basic State Pension (ie who qualified under the old scheme pre-2016) can increase their pension income by adding contributions made by a husband or civil partner (as well as a former husband). Meanwhile, if a spouse or civil partner dies then it’s possible the surviving partner may inherit his or her pension (if it’s worth more than their own). In this instance DWP will make the adjustment themselves.
Pension credit. If you are on a low income then you may qualify for what is known as ‘pension credit.’ This is extra money to ‘top up’ your pension. For instance, to bring your weekly income up to £201.05 if you’re single or to a joint £306.85 with a partner. If you’re disabled and have a weekly income that’s higher, you might still qualify.
Changes to oversees credits
There was a time (pre-2021) when it was possible to claim NI credits if you were working abroad in Australia, Canada and New Zealand. But the law changed last year so it’s no longer possible, meaning you’ll have to ‘top up’ your NI contributions to make sure the full pension is yours when you retire.
Applying for your pension
It’s worth noting that although you will receive a letter from the government around four months prior to the date you’re eligible for the State Pension, you will still have to apply for it. In other words, it won’t be sent automatically. The quickest way to do this is to go online here. You will need to use a code from the retirement letter.
When to retire
It’s worth noting that there is no age at which you must retire. In the past this was 65, but now you can keep working for as long as you like. In other words, unlike yesteryear, your employer can’t insist that you ‘down tools.’ There are exceptions, such as if you no longer have the physical or mental capacity to do the role. You can, however, still be made redundant or be dismissed for underperforming etc.
Get in touch
Looking for advice on your pension entitlement for when you retire? Then give the team a call here at Black and White chartered accountants. Ring today 0800 140 4644 or contact us via our website right here.
