State Pension Advice
A state pension will give you a regular income from the date you claim it until you die. While it will give you a reliable base income, it can be a good idea to save for yourself to supplement it.
A state pension will give you a regular income from the date at which you claim it until you die. While it will give you a reliable base income, it may not be enough to support the lifestyle that you are used to, so it can be a good idea to save for yourself to supplement your state pension.
If you want to plan for your retirement, it can be a good idea to try and work out how much state pension you will receive. As of 2014/15, the maximum amount you can get weekly from the basic state pension is £113.10.
When can you claim a state pension?
You can claim a state pension when you reach state pension age. The state pension age for men is currently 65, while for women it is in the process of rising from 60 in 2010 to 65 in November 2018. You can find out your state pension age by using the government’s state pension age calculator.
The government has decided that from December 2018 the state pension age for men and women will increase to 66 by October 2020. It will rise further to 67 between 2034 and 2036, and to 68 between 2044 and 2046.
How your state pension is worked out
Your state pension will be based on the amount of national insurance you have paid throughout your working life.
When you can’t pay national insurance
If you are ill, unemployed or caring for someone, the government will make national insurance contributions on your behalf in the form of credits. You may also get national insurance credits if you are claiming child benefit. There have recently been changes to who can claim child benefit, which may affect national insurance credits.
How much will your state pension be worth?
State pensions are made up of two parts – basic state pension and additional state pension. It will be down to your individual circumstances as to what you receive. State pension usually increases year on year in the UK.
State pension rates
Basic state pension rate
- A single man or woman will receive a maximum of £113.10 per week in 2014-2015.
- A married man or woman or civil partner (who qualify with their own National Insurance contributions) will receive a maximum of £226.20 per week in 2014-2015.
You will receive a state pension if you have made enough national insurance contributions. You can find out the amount of contributions you have made by using the government’s State Pension Calculator, or by getting a state pension forecast.
If you haven’t made enough national insurance contributions, you may still be able to claim a pension if you are married to or in a civil partnership with someone who has made enough contributions.
The amount of state pension paid will increase each year in line with rising prices and wages.
Additional State Pension
Not everyone is entitled to additional state pension and the amount paid will depend on your earnings. The amount of additional state pension paid will increase in line with the increases in the basic state pension.
The Additional State Pension is being replaced by the New State Pension on the 16th March 2016 – if you reach state pension age after this date, you will get the New State Pension instead. However, if you reach or reached retirement age before this, you could be eligible.
Over 80 pension rate
The over 80 pension is available if you are over 80, and you have no basic state pension, or your state pension is worth less than £67.80 a week.
The over 80 pension can top up your pension to this £67.80 limit – for example, if you receive no basic state pension, you could get £67.80 for your over 80 pension. However, if your state pension was £25 a week, your over 80 pension could be £42.80, topping your overall pension up to £67.80.
There are two types of pension credit – Guarantee Credit and Savings Credit. Both are available to people who are living in the UK and are over 65.
Guarantee Credits can top up your pension to:
- £148.35 a week if you are single
- £226.50 a week if you have a partner.
Savings Credit can top up your pension to:
- £16.80 extra per week if you are single
- £20.70 extra per week if you have a partner.
Pension credit increases every year in line with average UK earnings.
How is price inflation measured?
Since April 2011 the government has used the Consumer Price Index (CPI) to measure rises in prices.
State pension for expats
You can claim your state pension outside of the UK an expat, however it will not rise year on year unless you live in an area which is in the European Economic Area (EEA), Switzerland or a country in which the UK has a social security agreement which includes state pensions. If you live outside these areas, your pension will not increase yearly, but if you move back to the UK at any time, it will increase to its current levels in the UK.
How state pension is paid if you live abroad
If you live abroad your pension can be paid in two ways, either to your bank account in the country that you live in or into a UK bank account or building society. To be able to be paid in your account in the country that you live in, you must live in one of the following countries:
You will be paid in the currency of the country that you live in. If the country that you live in is not on the list, you will have to be paid in a UK bank account or building society, or by a cheque sent to your home address.
If your pension is very small (under £5 a week), you will usually be paid with a lump sum annually around Christmas.
If you only spend part or your time abroad
If you divide your time between countries, you will have to decide on one country where you want your pension to be paid.
If you decide to come back to the UK
If you decide to return to live in the UK, your pension will be paid into your UK bank account.
Paying tax on your state pension
The tax you will pay on your state pension will depend on if you are a non-UK resident and the country which you are living in.
If you move abroad permanently you will be classed as a non-UK resident. If you spend any part of your time in the UK, however, you will be classed as a UK resident. If you are a non-UK resident and you live in a country with a ‘double taxation agreement’ with the UK, you will not have to pay tax to the UK, but you will be charged tax in the country that you live in. If the country that you live in does not have a double taxation agreement, you will have to pay tax to both the UK and the country that you live in.
Making contributions to your state pension if you live abroad
If you are planning to work abroad, you need to inform The Pensions Service, HM Revenue & Customs’ National Insurance Contributions Office and your local tax office and provide them with your new address. You will receive a booklet 4 months before you reach state pension age which will ask you about any insurance and residence you may have in other countries.
If you are living in a country which is part of the European Economic Area, you will need to inform the Pension Service if you have worked in the country you are now living in, at which point your pension will be paid through the pensions institution of the country you are living in. If you have not worked in the country in which you now reside, you will get your pension from the International Pensions Centre.
Your state pension after you die
Basic state pension
The surviving spouse of a marriage or civil partnership will be able to claim some of the deceased’s state pension if they have not built up enough national insurance contributions. They will lose this right if you die before they reach state pension age and remarry or form a new civil partnership before they reach state pension age.
If you defer from claiming your state pension then the surviving spouse may be entitled to more money.
The surviving spouse may be able to claim one of the following benefits if you have made enough national insurance contributions:
- a one-off Bereavement Payment
- bereavement Allowance for one year
- widowed Parent’s Allowance, if they are looking after a child or children.
If the surviving spouse is under the state pension age, they may be able to get tax credits.
Additional state pension
If you have been contributing to an additional state pension, your surviving spouse may be able to claim part of it if you die. If they are able to claim some of your additional state pension, the amount they receive will depend on the year they were born:
- Men born on or after 6 October 1945 will receive 50%.
- Men born on or before 5 October 1937 will receive 100%.
- Men born between 6 October 1937 and 5 October 1945 will receive 60% to 90%.
- Women born on or after 6 July 1950 will receive 50%.
- Women born on or before 5 October 1942 will receive 100%.
- Women born between 6 October 1942 and 5 October 5 July 1950 will receive 60% to 90%.
If you die before claiming the state pension you have deferred from claiming
If you die before you claim your deferred state pension, your surviving spouse may be able to claim the extra state pension that you have built up. The same applies for you additional state pension (if you have one).
If you chose to have your state pension paid in a lump sum, this will be included in your estate and your surviving spouse will not get an increase in their pension payments.
State pension rights if you do not have a partner
If you die without a partner, your state pension will become part of your estate. Whoever is in charge of your estate will be able to claim 3 months of extra state pension payments.
Working after retirement age
The age that you can claim state pension is increasing all the time – it can be a good idea to check when you will be able to claim a state pension and to plan for the future.
Consider your employment options
If you decide to carry on working past your state pension age, you may want to consider asking your employer for flexible working options. Flexible working options give you more flexibility when it comes to choosing the hours you work.
You may also decide that you want a change and look for a new job or decide to start working for yourself. Also, if you don’t need any extra income, you may want to volunteer.
Advantages of working for longer
There are several advantages in continuing to work after state pension age. You will end up taking home more money, as once you reach state pension age you no longer have to pay national insurance. Also, once you reach 65, you get greater tax advantages. You will be able to claim state pension on top of your earnings or if you can put off claiming your pension, you can get a larger amount or if you put off claiming it for at least a year, can claim a lump sum.
Requesting to work past retirement age
As of October 2011, an employer can no longer force an employee to retire unless it is specified in your contract and your employer can justify it (for example, if your job requires physical exertion which may be difficult for someone who is over 65). Any attempt to retire you without good reason could be considered to be age discrimination.
Making up a national insurance shortfall
If there are gaps in your payment of national insurance, you may not have paid enough to earn the basic state pension. There are several ways that you can find out about gaps in your national insurance record;
- HM Revenue & Customs (HMRC) might send you a letter letting you know of any gaps. You can then choose if you want to pay off the gaps.
- You can call the national insurance enquiry line on 0845 915 5996 and request your contribution record for the last 6 years and be able to see any gaps you might have.
Deciding to make up any shortfall
It is completely up to you whether you decide to pay for any shortfall. As the number of qualifying years has now dropped, there is a chance you will not have a shortfall even if there is a gap in your contributions. You can get a detailed state pension forecast which should help inform you as to what you might expect to get when you claim your pension.
Bereavement benefit and qualifying years
To claim bereavement benefits you will have need to have made 39 years worth of contributions if you are a woman and 44 years worth if you are a man. This may be something you want to consider when deciding if you want to make up your national insurance contribution shortfall.
Deadlines for making up a national insurance contribution shortfall
The normal deadline for paying shortfalls is before 6 years from the year in which the shortfall was made, although this may be extended in some cases for the tax year to 2015-16. Please see the HMRC site for more details.
When you reach state pension age
When you reach state pension age you will no longer be required to pay class 1 or 2 national insurance contributions if you carry on working. As class 4 contributions are paid annually, you may have to pay them for the year that you reach state pension age. However, after this, you will no longer have to pay them.
Applying for an age exception certificate if you carry on working
If you continue to work after you reach state pension age, you should write to HM Revenue & Customs (HMRC) to claim an Age Exception Certificate which will stop you paying national insurance contributions.
You will need to provide them with;
- your name and address
- a contact number
- your national insurance number.
Once you receive your certificate, you will need to give it to your employer.
Alternatively, you could show your employer your passport to prove that you are state pension age.
If you are self employed, then you simply need to stop paying contributions once you reach state pension age.
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