Pensions Explained

pensions explained

Will I Get a State Pension? 

Rules around state pensions can be really tricky to understand, and few people really know what they will be entitled to and when. In this guide, we will explain what the state pension is, how it works and when you can expect to receive it. 


What is the State Pension? 

In April 2016, the government introduced a ‘flat-rate’ state pension that applies to those reaching statepension age on or after that dateThe previous system continued for anyone who reached retirement age before this date. 


When Will I Receive a State Pension? 

You receive the state pension when you reach the Government’s official retirement age, which depends on when you were bornThe retirement age is gradually being raised as follows: 

  • For men born before 6 December 1953: retirement age is 65 
  • For men born on or after 6 December 1953: retirement age rises from 65 to 66 by April 2020
  • For women born before 6 April 1950: retirement age is 60
  • For men born on or after 6 April 1950: retirement age rises from 65 to 66 by April 2020 

      Further increases to the retirement age are planned for both men and women. It is set to rise to age 67 by 2029 and then to age 68 between 2037 and 2039. 


      How Much State Pension Will I Receive? 

      This depends on how many ‘qualifying years’ of National Insurance contributions you have made when you reach retirement age. To earn a qualifying year, you must have earned a minimum amount of money during a tax year (6 April to 5 April) and paid the required NI contributions. You can check how many qualifying years you have here 

      You need a minimum of 10 years’ contributions to get any state pension at all, and you’ll need 35 years of contributions to get a full state pension (£168.60 per week for the 20192020 tax year). If your number of qualifying years falls somewhere between 10 and 35, you’ll get the equivalent value of the state pension according to the total number of years you’ve built up. You can ‘buy back’ qualifying years if you wish to, but you should look carefully at the cost of doing this and what it would gain you.  

      Qualifying years can be from before or after 6 April 2016 and don’t have to be consecutive qualifying years. You can get an estimate of your state pension here 


      Do I Need a Private Pension Too? 

      Unless you think you will be able to sustain your lifestyle on the state pension you will be entitled to, it is well worth considering starting a private pension to top up what you will receive from the state. You also get tax relief on pension contributions, so it can be a very tax-efficient way of saving for the future. 

      Since the introduction of Automatic Enrolment, which was phased in by the government gradually from 2012, it is now mandatory for all employers to enrol eligible employees into a workplace pension scheme. Employers are obliged by law to pay into this pot along with the employee, and the government tops up the fund too, in the form of tax relief. If you are eligible for this scheme, it would be wise to join if you can afford to do so. 

      Pensions can be a confusing area to understand, so if you feel you’d like some expert advice on the best way for you to save for retirement speaking to a Financial Adviser could help. Make sure you find a regulated financial adviser who is authorised to give you advice and recommend suitable pensions products and investment options.

      pensions explained