A Money Unspun guide to UK state pensions and how to make sure you get the most from them

The UK state pension is a lump sum or regular payment that you can claim when you reach a certain age.

At the time of writing, the retirement age for the UK state pension is 66 for both women and men, but it will be rising to 67, then 68 in phased stages over coming years, for people born after 5 April 1960.

In this no-nonsense Money Unspun guide, we’ll set out how the UK state pension works, how to claim, and other useful tips to make sure you get the most from it.

UK STATE PENSION – THE BASICS
The UK State Pension system changed in 2016, and how much you get depends on your National Insurance (NI) record. To get the full pension, you need 35 years of NI contributions, which includes self-employed people and those who paid into a workplace pension.

Even if you haven’t reached 35 years, as long as you have at least 10 years, you’ll still get the relevant proportion of the UK state pension.

So, for example, if you’ve got 20 years of contributions, you’ll get 20/35ths of the full pension. With the full state pension currently set at £221.20 a week, you’d be looking at:

20/35 x £221.20 = around £126.40 a week.

You can also fill any gaps by paying voluntary contributions.

Payments are usually made every four weeks, and the UK state pension increases annually, usually by whichever is higher – inflation, wage growth, or 2.5% (the “triple lock”). To check your entitlement, you can get a state pension forecast from an advisor or using online tools.

You should receive a letter from the Pension Service no later than 2 months before you reach State Pension age. This letter will explain how to claim your pension. If you don’t get this letter, don’t worry, you can still apply online, by phone, or by post. The first payment usually arrives within five weeks of claiming it. Payments are then made every four weeks after that.

To claim, you’ll need to give your National Insurance number, date of birth, and other personal details such as address, phone number, etc.

DEFERRING YOUR UK STATE PENSION
You don’t have to claim your pension right away. In fact, if you wait, you could potentially get more money.

When you delay or “defer” claiming your State Pension, the government offers an incentive. If you defer for at least 9 weeks, your State Pension will grow by about 1% for every 9 weeks you wait, which works out to just under 5.8% for every full year you defer.

Therefore, the longer you put off claiming your pension, the more money you could end up getting when you finally do claim it. This is helpful if you don’t need the money right away and are still working or you just want a larger weekly payment when you do start taking it. Whether to defer or not depends on your personal situation.

INHERITING UK STATE PENSION BENEFITS
In some cases you can inherit part of your spouse’s or civil partner’s pension. This usually applies if they’ve built up additional state pension under the old rules before 2016. It can also happen if they deferred claiming their state pension and you’re entitled to a lump sum or higher payments as a result.

It’s important to check your National Insurance (NI) record and get a forecast, especially if you’ve lost a partner, as you might qualify for extra payments you didn’t know about.

Things can be tricky depending on individual circumstances, if you were contracted out of certain pensions for instance, or if you remarry. Getting a proper forecast from a financial advisor helps you understand what you’re entitled to and plan better for your financial future.

WHAT HAPPENS IF YOU KEEP WORKING?
If you keep working after reaching State Pension age, you can still claim your State Pension while earning an income and it won’t affect your State Pension amount. The good news is that once you hit state pension age, you no longer have to pay National Insurance contributions, which means a bit more take-home pay.

But there are a few things to keep in mind.

Firstly, the income from your job and your state pension combined might push you into a higher tax bracket, meaning you’ll pay more tax on your earnings.

Secondly, if you’re getting other benefits like pension credit or housing benefit, your extra income from working could affect them. You should weigh up the pros and cons depending on your personal situation, or contact a professional advisor if you’re unsure.

WHAT IF YOU WERE “CONTRACTED OUT” DURING EMPLOYMENT?
If you were “contracted out” in the past through a workplace pension scheme, it could affect how much state pension you’ll get when you retire.

Being “contracted out” basically means that, instead of paying into the additional state pension (the earnings-related part of the old state pension system), some of your National Insurance contributions were redirected into your workplace pension or a private scheme. This means there’s likely to be a deduction when they calculate your state pension amount because you paid less NI during those years.

But don’t worry, it doesn’t mean you’ll lose out entirely. Your workplace pension has taken the place of that missing additional state pension, so it’s still part of your overall retirement income.

WHAT IS PENSION CREDIT?
Pension credit is a benefit for people over state pension age who are on a low income, providing extra money to help with living costs. It also assists with housing costs like ground rent or service charges.

There are two parts to pension credit.

• Guarantee Credit tops up your weekly income to a minimum level – currently £218.15 for single people or £332.95 for couples (as of the 2024/25 tax year).
• Savings Credit gives you a little extra income on top of your State Pension and Guarantee Credit. How much you get depends on how much you’ve saved or invested for your retirement. You might get up to £17.01 per week if you’re single or up to £10.04 per week for couples (2024/25 rates).

In addition to boosting income, pension credit may give you access to other benefits such as housing benefit, winter fuel payment, council tax discounts, and help with NHS costs. If you’re 75 or older, you may also qualify for a free TV licence.

Pension credit is separate from the state pension, and you might still be eligible even if you have savings, other income, or own your home.

PLAN FOR A FINANCIALLY SECURE RETIREMENT
Planning for retirement might feel overwhelming, especially with all the rules surrounding the UK state pension. That’s where expert advice makes all the difference.

We’re here to help you understand how the state pension fits into your broader financial plans and make the most of your retirement savings.

Whether you need help boosting your pension, understanding your NI contributions, or figuring out how working into retirement affects your income and taxes, our experienced financial advisors are ready to guide you every step of the way. Get in touch today.