What do YOU know in regards to the state pension? SIX key questions answered

Poor understanding of the state pension means many people nearing retirement do not know how much it is or when they will get it, new research reveals.

One in six over-55s do not know the current rate, while just over a third have a rough idea, and fewer than a third know the headline figure – £221.20 a week or around £11,500 a year.

Meanwhile, one in five do not know their state pension age, which is currently 66 for both men and women and will rise to 67 between 2026 and 2028, according to the study by Standard Life.

Knowledge gaps in areas like eligibility, qualifying years, and how the state pension differs from workplace savings have led to a number of misconceptions, according to the firm.

‘The most prominent was that each person’s National Insurance contributions are kept in a personal pot to be accessed when they reach state pension age,’ it says. 

‘This was a strongly held belief that impacted participants’ views about the fairness of the system.’

> SIX things you should know about the state pension: Find out below

In reality the state pension is funded on a pay-as-you-go system by current taxpayers, but this information provoked a ‘strong emotional response’ from participants who felt the system to be unfair.

The firm says people largely agreed that if someone makes 35 years of contributions, they should be entitled to receive this money and not lose it if they die before recouping it, and the Government should not use their contributions for something else.

Meanwhile, Standard Life found one in seven people who receive the state pension are receiving less than the full amount – an issue This is Money’s pension columnist Steve Webb is asked about often.

It will probably be because they either did not have enough qualifying years on their National Insurance record, or they ‘contracted out’ of the second state pension or SERPS, which under the pre-2016 system meant you built up a bigger work or private pension instead.

One in ten retirees said they didn’t realise National Insurance contributions determine the state pension they are paid in retirement – find your NI record here.

The same proportion said it wasn’t easy to find out how much state pension they were in line to receive – check your state pension forecast here.

Younger people are even less likely than over-55s to know about the state pension, and across all age groups 47 per cent don’t know at what age they will get payments. 

Some 35 per cent have no idea what the state pension is currently, 45 per cent have a rough idea and 20 per cent know exactly.

Standard Life carried out two surveys, one involving 6,350 and the other 2,000 people, both weighted to be representative of the UK adult population.

‘The state pension remains a hot topic, with pensioners recently enjoying an 8.5 per cent increase to their payments under the triple lock.’ says Dean Butler, managing director for retail at Standard Life.

‘While a welcome boost for millions, concerns have been raised about its sustainability for future generations.

‘With this level of debate and some complex rules and terminology, it’s understandable that a significant proportion of UK adults lack knowledge around specific state pension details such as the value of their entitlements, and when they’ll qualify for payment.

‘However, the state pension is a significant part of most people’s retirement income and it’s clear that greater prominence and more accessible information is needed so people feel confident and can plan for their financial future.’

Butler added that there is a significant gap between what you get from the state pension and what you may actually need or want in retirement, and it also won’t help to support you if you aim to retire before your late 60s.

‘It should therefore only form part of your overall retirement plan, and so it’s important to fully understand how much you might need to save into your personal or workplace pension plan to potentially be able to afford the retirement you want.’

He cited industry research from the Pensions and Lifetime Savings Association, which looks at what individuals and couples need for a minimum, moderate or comfortable retirement. and shows the costs have risen significantly across the board over the past year.

A couple now need £59,000 a year to be comfortable in old age, and a single person needs to save even harder and achieve a £43,100 income to cover meals out, holidays, theatre trips and a car, in addition to everyday essentials.

The PLSA figures assume you qualify for a full state pension, but the annual income figures do not cover income tax, housing costs – if you rent or are still paying off a mortgage – or care fees.

SIX things you need to know about the state pension

1. How much will you get?

The headline full rate state pension is £221.20 per week or around £11,500 a year.

The basic rate is £169.50 a week, or around £8,800 a year. But people on the basic rate also get hefty top-ups, called S2P or Serps, providing those were earned earlier in life.

Older people got an 8.5 per cent boost to the state pension from 8 April 2024.

Dean Butler of Standard Life says: ‘The state pension is an amount paid to you every four weeks by the government once you reach state pension age.

‘Not everyone can get the full state pension and it might not be enough to live on by itself, therefore it’s important to know what yours might be, when you can claim it, and how it will stack up with your other retirement savings.

‘It’s worth keeping in mind that the amount you’ll get depends on your National Insurance record and how many qualifying years you have.

‘You’ll usually need at least 10 qualifying years on your National Insurance record to get any state pension. You’ll need 35 qualifying years to get the new full state pension if you don’t have a National Insurance record before 6 April 2016.’

You can check your National Insurance record here and your state pension forecast here.

2. When can you start drawing your state pension?

As things stand now, men and women’s state pension age is 66, and between 2026 and 2028 it will rise again to 67.

In 2028, the minimum pension age will also go up, from 55 to 57. for accessing workplace and other private retirement savings.

The Government has a state pension calculator here, and This is Money has a guide to the state pension age here.

Butler says: ‘If you don’t want to take your state pension immediately, you can also choose to defer it. This means you could get larger payments when you do start claiming it, which might suit you depending on your circumstances.’

3. Can you improve your state pension?

Buying state pension top-ups can give a huge boost to retirement income, but people are often baffled over whether this will be worthwhile for them personally.

You will need to check your state pension record to find out what you have paid towards one already, then decide if you need to top up and if so which years to either fill in gaps or purchase from scratch.

The Government launched a new online top-ups service to help people do this more easily.

The website lets people check which years are best to top up and buy on the spot, but they will still be able to phone up and pay offline if they prefer.

Use the online state pension top-ups service here or go to the HMRC app.

This is Money has a guide to topping up your state pension here, which includes what to check before handing over any money.

Butler says: ‘If you’ve reached state pension age and you’re on a low income, it’s worth checking if you’re eligible for pension credit.

‘This tax year, pension credit usually tops up your weekly income to £218.15 if you’re single or your joint weekly income to £332.95 if you have a partner.’

4. What is the triple lock?

The triple lock means the state pension should increase every year by the highest of inflation, average earnings growth or 2.5 per cent.

The Tories and Labour are both planning to commit to keeping the popular pledge in their election manifestos.

Older people got an 8.5 per cent boost to the state pension from 8 April 2024 – the wages growth figure decided the rise, after the September CPI inflation number came in at 6.7 per cent.

5. How do you claim the state pension?

You should receive a letter a few months before your state pension age with an invitation code.

However, not everyone receives this so you can find out to request the code and make a state pension claim here.

To claim you will need:

– The date of your most recent marriage, civil partnership or divorce

– Dates of any time spent living or working abroad

– Your bank or building society details

– The invitation code

You have to make a proactive claim for your state pension – payments will not begin automatically. If you don’t claim it on time the Government will assume you have deferred your state pension.

6. How and when are payments made?

You won’t start getting the state pension the first day or week you become eligible because it is paid four weeks in arrears, so you should wait before making enquiries with the Department for Work and Pensions.

Butler says: ‘After you’ve made a claim you will get a letter about your payments, which will usually be paid every four weeks into an account of your choice, and you’re paid in arrears.

‘The payment day depends on your National Insurance number, although you might be paid earlier if your normal payment day falls on a bank holiday.’