Understanding Your State Pension: 5 Key Facts You Need to Know

The state pension is a retirement benefit in the UK, providing a regular income to eligible individuals who have reached state pension age. The amount received is based on your National Insurance (NI) contributions over your working life. Understanding the answers to ‘What is it?’ and ‘How much will I get?’ is crucial as it forms much – maybe even all – of your retirement income, though it can be supplemented by workplace and personal pensions that you choose to set up and pay into. This blog from the pension experts at KGJ will cover the basics of state pensions and how they work as clearly as possible. For even more information, you can visit the government website for the state pension.

The Basics of the State Pension in 2024

How Does the New State Pension Work?

The answer to the question ‘How much is the state pension?’ isn’t as straightforward as you may hope. As you work and pay NI contributions, you accumulate ‘qualifying years’ that contribute towards your entitlement. Generally, you’ll need at least 10 qualifying years to get anything, but 35 qualifying years are required for the full amount.

At the time of writing in 2024, the full new rate is £221.20 per week.

When Can I Get My State Pension?

Both the pension itself and the retirement age you can begin claiming at have undergone changes in recent years to reflect increasing life expectancy. Currently set at 66 for both men and women, plans are in place to increase it gradually to 68. Understanding this and planning accordingly is vital for financial stability in retirement.

What Is the State Pension for a Married Couple?

There’s no specific pension for couples, but if both partners each qualify for the full new state pension, both will get £221.20 per week, which amounts to £11,502.40 per year per person.

Is State Pension Taxed?

It’s also important to note that the state pension is indeed subject to income tax, depending on your total income in retirement. Obviously, this affects the net amount you receive and will have a significant impact on how you plan your finances in retirement. Here at KGJ, we offer essential independent pension advice no matter where you are on your journey to retirement.

Types of State Pensions: What Is a Basic Pension?

Let’s quickly look at the differences between the basic and the new system, which may or may not apply to you:

• Basic Pension: Available to men born before April 6th 1951 and women born before April 6th 1953, to qualify you need sufficient qualifying years of NI contributions. The amount will vary based on this but is generally lower than the new state pension.
• New Pension: Introduced in April 2016 for men born on or after April 6th 1951 and women born on or after April 6th 1953. It requires at least 10 qualifying years too, but you need 35 years for the full amount, which is significantly higher than the basic state pension.

These changes simplify the state pension while ensuring a basic income level for retirees, with the new system designed to be more straightforward about how much you’re likely to receive.

Planning for Retirement: What Is a State Pension in the UK?

Planning your retirement around your state pension means understanding how to maximise your funds and integrate them with other retirement plans such as a private pension.

• Maximising it: You can increase your state pension amount by delaying when you start to take it. For every week you defer, your pension will increase, which can significantly boost your total pension over time. Additionally, if you have gaps in your National Insurance record, you might consider voluntary contributions to fill these gaps.
• Integrating with Other Retirement Plans: The state pension often isn’t enough to maintain your pre-retirement lifestyle. Complementing it with private pensions, such as a personal pension or a Self-Invested Personal Pension (SIPP), allows a more comfortable retirement.

Sounding complicated? Not with the KGJ team on your side. Our fully independent, advised services will ensure bespoke retirement planning shaped around you, your circumstances and your lifestyle.

Need More Personalised Advice?

Financial peace of mind is so important at all stages of our lives, possibly even more so when our working days are over. Here at KGJ, our experts can help you plan for your retirement whether it’s years away or coming up fast. Contact us online, email us at enquiries@tpitdev1.uk or call 01384 390909 for a chat and together we can ensure you’re fully prepared to enjoy life when your retirement date arrives.