When planning for retirement, many people take into consideration the state retirement pension amount to figure out how much money they need to retire.
But, will there be a state pension when I retire and should we avoid relying on it in the long run?
Let’s find out.
Paying pensions is becoming increasingly challenging for certain countries, including the UK because people are living longer and are having fewer children than before.
There is no one definitive answer to whether there will be a state pension when you retire.
The money for state pensions mostly comes from National Insurance contributions and if there’s more money going out than in (fewer workers, more retirees, or longer retirements) it will eventually run out unless the UK government makes certain changes.
That’s why the UK recently decided to gradually increase the age at which people are eligible to get a state pension.
The current pension retirement age for men and women is 66 years old. When pension planning, you’ll also need to take into account whether you will have enough for a comfortable retirement.
The full New State Pension is £185.15 per week or £9,627.80 a year.
To qualify for the “full level” state pension payments, you need to have made National Insurance contributions for at least 35 years. You can find out how much you’re likely to get by using the government’s online state pension calculator.
To get any state pension, you must have 10 years of National Insurance contributions.
The full basic State Pension for the 2022-2023 fiscal year is £141.85.
Only men born after 6 April 1951 and women born after 6 April 1953 are eligible for a basic State Pension. Those who fall under this group can increase their state pension by making extra voluntary National Insurance contributions.
People born after those dates, who are only eligible for the new State Pension, cannot top up their State Pension. However, they can inherit an additional state pension from their spouse or partner if they were born before these dates.
In 2016, the UK government introduced new rules.
UK citizens that reached the State Pension age before 6 April 2016 have their State Pension based on the old rules. If you have reached the State Pension age after that date, your State Pension will be based on the new rules.
The Department for Work and Pensions calculates the amount of state pension you are eligible for based on how many years you have paid National Insurance, the number of years you were contracted out (if that ever happened), and any additional state pension you have earned.
For those who made National Insurance contributions or got National Insurance credit before 6 April 2016, the Department for Work and Pension will use their record before that date to calculate a “starting amount.”
The starting amount will be either the amount they’ll get under the old rules or the amount they would get under the new pension rules, whichever is higher.
If you didn’t make National Insurance contributions or got National Insurance credit before 6 April 2016, the DWP will calculate your state pension under the new rules. Every qualifying year adds 1/35th of the full amount of the state pension ( £185.15 per week for 2022/2023).
“Contracting out” was a system that allowed workers to skip out on Additional State Pension by paying a lower rate of National Insurance contributions.
This resulted in a reduction in the state pension, also known as “contracted out deduction.”
That means that if you were contracted out of an Additional State Pension, DWP will consider it when calculating your state pension.
In order to claim your state pension in the UK, you’ll need to apply for it online or by post.
The first step is to gather the relevant information, including your National Insurance number and date of birth. You’ll also need to provide proof of identity and residency in the UK.
To apply for the state pension online, you’ll need to create an account on the government’s website.
If you choose to apply by post, you can download a copy of the form from the government’s website. You’ll then need to send the application form and supporting documents to the address listed on the form. The government will process your application and inform you of their decision.
If you are approved for a state pension, the government will send you a letter confirming the amount of pension you are entitled to and the date it will start.
When you hit the State Pension age and get approved for a state pension, you’ll get your first payment in around 5 weeks. After that, you’ll get a full payment every 4 weeks.
Yes, you can. However, there are a few things to keep in mind:
Will there be a state pension when I retire in the UK? Unfortunately, there’s no way to get a definitive answer. The good news is the government has taken action to change the rules and prevent the state pension pot from drying out completely and the full new State Pension increased for this fiscal year.