Your guide to the state pension

Pensioners this month receive the biggest ever increase in the state pension. Here’s all you need to know about what you’ll get, when to claim and more.

This month the state pension rises by a whopping 10.1%, taking weekly payments on the full new state pension from £185.15 to £203.85, and the basic state pension from £141.85 to £156.20 per week.

The increase – which is the biggest ever – means claimants who are entitled to the full payments will now get a state pension worth around £10,600 a year.

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Although the state pension does take a lot of flack, it’s not to be sniffed at, and can make a significant difference to your income in retirement. In fact, it would take a private pension worth around £190,000 to deliver the same amount of income each year (1).

We explain everything you need to know about the state pension, from when you can start claiming it through to how much you’ll get and more with our guide.

What is the new state pension?

The new state pension replaced the basic and additional state pension in April 2016. The idea behind the new state pension was to combine these two elements into one, easier to understand payment.

People that reached state pension age before 6 April 2016 stayed on the old scheme, but anyone who reaches state pension age after that date gets the new state pension.

When will I get it?

You can start claiming the state pension as soon as you reach state pension age.

This is currently 66 for both men and women, but it is scheduled to rise to 67 between 2026 and 2028, before going up to 68 between 2044 and 2046.

However, a recent state pension age review has recommended that the increase to age 68 should be bought forward to between 2041 and 2043.

This means that under-50s could see further rises to their state pension age.

A decision on whether that recommendation will be implemented is expected in two years – after the next general election.

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How much state pension will I get?

Eligibility for the new state pension comes down to one thing: your National Insurance contributions, or NICs (2).

To qualify for the full new state pension – £203.85 a week – you need to have 35 years of contributions. If you have less than 35 years (but more than 10) you’ll get a proportional amount, with each year of contributions being worth 1/35th of the full amount.

If you have less than 10 years of contributions you won’t be entitled to any state pension.

However, if you’ve built up any entitlement to the state pension before the new state pension was introduced (so if you had paid any National Insurance prior to 2016) it gets a bit more complicated.

Your record of NICs before April 2016 will be used to calculate the ‘starting amount’ of your new state pension.

This will be the higher of:

• How much you would get under the old state pension (basic and additional state pension combined)
• How much you would have received, had the new state pension been in place throughout your working life

However, there may be a deduction from your starting amount if you were ever ‘contracted out’ of the additional state pension and paid into a separate private pension in return for lower NI contributions.

If your starting amount is higher than the full new state pension, that additional money is guaranteed and is known as your ‘protected payment’.

What’s the triple lock?

The reason the state pension has had such a big increase this year comes down to the triple lock.

This guarantees that the state pension will go up each year by the greater of 2.5%, wage growth or inflation. So, with inflation being at a sky high 10.1% in September 2022 (the month that matters when it comes to deciding what it will be), that meant the state pension had to go up by the same amount.

The triple lock covers payments made by the new and basic state pension, but not the additional state pension.

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It’s important to note though that this guarantee is only in place for as long as the triple lock – which is something of a political hot potato – remains in place.

It was, for example, temporarily suspended in the 2022 tax year, after disproportionately high wage growth after the pandemic.

At the moment, the triple lock is only guaranteed until the end of the current parliamentary term (2024).  Removing the triple lock would undoubtedly help the new government’s coffers, but it wouldn’t win them any votes, making it a tough political call.

What if I haven’t paid enough National Insurance to get the full state pension?

If you don’t have the full 35 years of NICs, you won’t get the full state pension.

NICs are normally deducted from your earnings, but even if you’ve had long spells out of work, that doesn’t necessarily mean you won’t have enough qualifying years. That’s because if you have been out of work or unwell and claiming certain benefits, you will have been given National Insurance credits.

However, if you are still short, it is possible to buy voluntary national insurance contributions. These can be an excellent investment – especially if you are in good health and go on to have a long retirement.

You can find out exactly where you stand by applying for a state pension forecast online. This will tell you how much state pension you are on track to get, whether you can top it up and when you’ll be able to claim.

How will my state pension be paid?

You’re entitled to your state pension as soon as you reach your state pension age, but it won’t be paid automatically. You’ll need to submit a claim.

Around four months before you reach your state pension age, you should receive a letter inviting you to claim. This should include a code that allows you to submit a claim online, but you can also contact the Pension Service to claim over the phone or by post.

Payments are usually paid direct to your chosen bank account every four weeks in arrears (which means your payments cover the last four weeks, rather than the next four).

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Can I defer my state pension?

You don’t have to start claiming the state pension if you are one of the many older workers that decide to work beyond pension age, or if you don’t have an immediate need for the money.

In fact, there is even an incentive to defer claiming the state pension.

For every nine weeks that you delay making a claim, your payments will increase by 1%. That effectively means that if you defer your pension for a full year, you’ll get a 5.8% increase when you do eventually claim.

Whether it makes sense to defer isn’t always a straightforward decision though and you’ll need to think about your health and life expectancy first. That’s because, if you deferred your pension for one year, you would need to live around 17 years to recoup the income you sacrificed in those 12 months.

1) Figure based on 5% growth annually, no tax-free cash and delivering income until age 90

2) You pay mandatory National Insurance if you’re 16 or over and are either an employee earning above £242 a week, or self-employed and making a profit of more than £11,908 a year. Source: https://www.gov.uk/national-insurance