How does the State Pension work?
Did you know that not everyone gets a state pension in the UK, and payouts vary heavily from person to person, even for those who qualify? Here is how the state pension works, what the triple lock is and when you can claim your pension.
What is the state pension?
The state pension is a qualifying benefit provided by the UK government.
You need to build up a certain number of National Insurance credits to be able to claim it - you can do this by working and paying tax, looking after children, receiving certain benefits, or while on jury service or maternity/paternity leave.
Once you have built up enough National Insurance credits, you'll be entitled to receive the state pension as soon as you reach the Government’s official age (which is currently 66).
A state pension is different to a private pension. With a private pension, you have total control over the provider and how your savings are invested.
What is the triple lock?
Since 2010, UK governments have promised to increase state pension payouts by at least 2.5% a year. What’s more, if average prices or earnings increase by more than that rate, pensions will go up to match whichever measure rises the most.
This so-called "triple lock" was designed to ensure pensioners do not become poorer relative to working people or due to rising prices on things like food and fuel.
However, the triple lock’s earnings element was suspended for 2022/23.
Which state pension will you get?
If you retire after 6th April 2016, you will get the new state pension.
If you retired before the 6th April 2016, you get the basic state pension.
The state pension age for men and women is currently 66, although this is set to rise to 67 between 2026 and 2028.
New state pension
The amount you get depends on how long you have been paying National Insurance (NI).
To get the full new state pension of £221.20 a week, you must have paid National Insurance for 35 years.
You’ll need a minimum of 10 qualifying years to get any state pension, which would give you £63.20 per week.
If you want to know exactly how much state pension you could get, contact the Department for Works and Pensions on 0345 300 0168 or visit the GOV.UK website.
Basic state pension
Basic state pension is also based on how long you have paid National Insurance, but you may have the option to top up your contributions to qualify for the maximum amount.
To get the full basic state pension of £169.50 a week, you need to have paid National Insurance for 30 years.
You may also qualify for the Additional state pension on top of your basic state pension. Find out more on the GOV.UK website.
How much will pensions rise each year?
The new state pension rose by 8.5% to £221.20 a week in April 2024. The new Labour government announced a further increase in the new state pension, of £230.30 a week would come into effect into effect in April 2025.
The basic state pension will also increase at the start of the 2025/26 tax year, from £169.50 to £176.45. The 4.1% increase is in line with the average weekly earnings index for May to July 2024.
How much National Insurance do you pay?
If you work for someone as an employee, you may need to pay class 1 National Insurance (NICs) depending on how much you earn, for example:
| Weekly pay | NI rate |
|---|---|
| £0 to £242 | 0% |
| £242.01 to £967 | 8% |
| Over £967 | 2% |
What happens if you do not pay National Insurance?
If you are unemployed, a carer or earn less than £155 a week, you may qualify for National Insurance credits.
Find out if you are eligible at the gov.uk website.
What if you are self-employed?
You will pay either class 2 or class 4 contributions through your self-assessment form at the end of the tax year.
The amount you contribute depends on your profits for the year:
Class 2: These are paid if your profits are over £6,515 a year and cost £3.05 a week.
Class 4: These amount to 9% of any profits between £9,569 and £50,270; and 2% on any profits over that amount.
How do you pay National Insurance?
This depends on your type of employment:
If you are employed, your employer is responsible for paying National Insurance to HMRC on your behalf.
If you are self-employed, you are responsible for declaring your income and paying National Insurance.
Your National insurance is paid to HMRC and gives you a state pension when you reach your pension age.
Can you top up your National Insurance contributions?
If you haven’t paid enough National Insurance over the past six years, you can usually pay a lump sum voluntary contribution to make up for the missing years.
Find out more on topping up your National Insurance contributions on the gov.uk website.
What else does your National Insurance pay for?
As well as paying for your state pension, it also goes towards other benefits such as:
Jobseeker's allowance
Maternity allowance
Bereavement benefits
For more information on National Insurance visit the gov.uk website.
How to find out how much you have paid into your state pension
You can find out how much your state pension is worth by completing a form found on the gov.uk website.
After submitting the form, HMRC will send a state pension statement to you in the post.
When can you start claiming your state pension?
You can start claiming after you reach the state pension age - currently 66.
You do need to claim once you reach pensionable age, however. If you don't, your pension will automatically be deferred.
If you defer your state pension, you could get larger payments when you do start claiming.
However, you will need to live long enough for the extra payments to make up for the ones you deferred, and the increased payments could be subject to tax.
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About Jessica Bown
Jessica Bown is an award-winning freelance journalist and editor who has been writing about personal finance for almost 20 years.