Article What is the State Pension and how does it work?

Whatever your plans are for your life in retirement, the State Pension can be a regular, reliable part of your income. Knowing how it works, as well as if and when you qualify, could help you plan for the future. 

We've answered some common questions to help you understand the subject in more detail:

1. What is the State Pension?
2. When will I receive the State Pension?
3. How much money will I get from the State Pension?
4. Will I pay tax on my State Pension?
5. What's the triple lock?
6. How can I check my State Pension entitlement?
7. Can I defer my State Pension?
8. Is the State Pension enough to live on in retirement?

1. What is the State Pension? 

The State Pension is provided by the Government and acts as a bedrock of retirement income for many people. It’s paid regularly – usually every 4 weeks – once you reach State Pension age until the end of your life.  

Given its importance to your retirement income, it’s a good idea to work out when you’re entitled to the State Pension, what you’re going to get, and whether it’s enough for you to live on.  

2. When will I receive the State Pension? 

You can claim the State Pension from when you reach your State Pension age – currently this is age 66.¹ However, this is gradually going up. It’s rising to age 67 for those born on or after April 1960 progressively between 2026 and 2028. The Government is also reviewing whether it should increase again after this to age 68.¹ 

Find out when you’re expected to receive your State Pension using the Government’s Check your State Pension age tool. It’s likely to be different to the age you can access a workplace or personal pension.  

State pension changes before and after 6 April 2016 

The State Pension system was revamped on 6 April 2016.² Those reaching State Pension age after this date will receive the new State Pension, which has transitional rules to make sure no-one loses out by getting less under the new rules than they were entitled to under the old ones.  

If you have a record of National Insurance Contributions (NICs) prior to 6 April 2016, this will be used to calculate a ‘starting amount’ (how much you’d get weekly) as part of your new State Pension. If your starting amount is less than the full new State Pension, then your NIC record after 6 April 2016 will be considered when calculating your final entitlement when you come to claim your State Pension.  

If your starting amount is already higher than the full new State Pension, the additional money will be paid on top of your pension. But any additional NICs you make after 6 April 2016 won't further increase your total. If you were contracted-out of the earnings-related Additional State Pension under the old rules, this will have been accounted for when calculating your starting amount.  

To find out more about these transitional rules, visit the Government webpage the new State Pension. 

3. How much money will I get from the State Pension? 

The full new State Pension amount for those reaching State Pension age now is £203.85 per week for the 2023/24 tax year.³ This will rise to £221.20 in the 2024/25 tax year.³ But how much you get is dependent on how many qualifying years of NICs you have, including NI credits.  

NICs are deducted from your earnings once you earn above £242 a week from one employer, or if you’re self-employed and pay NICs.⁴ You can also build up NI credits for time spent out of the workplace, for example if you’re a carer or receive child benefit. 

What’s the minimum new State Pension amount? 

The minimum weekly new State Pension amount for the 2023/24 tax year is £58.20 per week. It will be £63.20 per week in the 2024/25 tax year. This is calculated by dividing the maximum weekly amount by 35 (the maximum qualifying years) and multiplying by 10 (the minimum number of qualifying years).  

Calculation using 2024/25 tax year figures:

• £221.20 / 35 = £6.32
• £6.32 x 10 - £63.20

This calculation is based on having no qualifying years of NI before 5 April 2016. If you have qualifying years from before 5 April 2016, your minimum weekly amount may be different. To understand how much you’ll have from pre-April 2016 NI record, read the Government’s page on the basic State Pension. 

​​​How many years do I need to work to get the State Pension? 

You usually need at least 10 qualifying years of NICs or NI credits to receive any income from the new State Pension, and to get the new full State Pension amount you’ll need 35 qualifying years.⁴ Having more than 35 qualifying years of NICS or NI credits won’t increase this amount. The rules are different for the basic State Pension – you can find out more on the Government page The basic State Pension.

Can I increase my State Pension entitlement if I need to? 

If you don’t have a full NICs record – for example, because there are years when you’ve earned no or low income, were self-employed and didn’t pay NICs, or were living abroad – you might be able to increase your State Pension entitlement by making additional voluntary National Insurance contributions. 

4. Will I pay tax on my State Pension? 

In most cases, yes. NICs are no longer required once you reach State Pension age, but your State Pension counts as taxable income. This means the amount you receive counts towards your total taxable income, and you’ll pay income tax on this. If the State Pension is your only form of income, this is likely to be under your personal allowance limit of £12,570 (the amount over which you need to pay income tax) and you won’t owe any tax.⁵ However, if you combine your State Pension with other income – for example from a job, a business initiative, or a private pension – you might go over your personal allowance and will pay tax ​​​​accordingly. 

To understand how taxes affect your pension in more detail, visit the MoneyHelper page How is my State Pension taxed?  

5. What’s the triple lock? 

The basic and new State Pensions normally increase in line with the ‘triple lock’. This is the Government’s guarantee that the new State Pension will increase by the higher of average earnings, the consumer price index (CPI) or 2.5%. On 22 November 2023, the Government announced that the State Pension would increase by 8.5% from April 2024, in line with average earnings growth between May to July 2023.⁶

6. How can I check my State Pension entitlement? 

GOV.UK can provide some useful tools to understand your personal circumstances. You can get a forecast of the amount you’ll receive for your State Pension by visiting the State Pension forecast tool, and check your NI record at Check your National Insurance record.  

7. Can I defer my State Pension? 

When you reach your State Pension age, you don't have to claim your State Pension straight away. Deferring could qualify you for higher payments when you do decide to start taking it. You can learn more about deferring your State Pension on GOV.UK.  

8. ​​​Is the State Pension enough to live on in retirement? 

The State Pension can provide a good basis for retirement, but it may not be enough to cover the type of lifestyle you might like to have when you stop working.  

There are ways you could look to improve your long-term savings. For example, you could benefit from free money in the form of employer pensions contributions if you pay into a workplace pension. You might also benefit from tax relief on your personal contributions. The value of any tax relief will depend on individual circumstances – to find out more read our guide to workplace pensions.

Ok, what should I do now? 

Once you know how much State Pension you’re likely to get and when – make a list of all the things you enjoy and want to continue doing in retirement. Think of things like nice holidays, gifts to your children, running a car, going out to concerts or eating in a restaurant. This will give you some idea of the level of income you’ll need in retirement. Try our Picture your best life tool to help you visualise this. 

A common principle is to aim to contribute a percentage of your salary each month, equivalent to half your age when you first started a pension. Of course, if you have a workplace pension, your employer will contribute as well. 

This article isn’t intended as financial advice. If you're not sure what to do or you need advice, please speak to a financial adviser. You can find one on the MoneyHelper website. There’s likely to be a charge for financial advice.