- Money Mentor
How much State Pension will I get when I retire?
If you’re the type of person who dreams about retirement and what you can do with your new-found pension freedom, then it’s likely that this question has popped into your head before: how much state pension will I get?
While working out exactly how much state pension you will get when you retire can be difficult to answer, it’s possible to make an educated guess by looking at the factors below....
State Pension Basics
You’ve probably been paying into the State Pension scheme throughout your working life. The amount you get when you retire depends on how much you’ve paid in, and how long you’ve been paying for.
If you’re not sure how much you’ll get, there are calculators available online that can give you an estimate.
The full amount is currently £175.20 per week, but most people don’t get the full amount. The average payout is around £137.35 per week. However, this can change depending on a number of factors including if you have time to build up a larger entitlement or if you took time out of work to care for children or elderly relatives.
To find out more about your individual circumstances and what you may be entitled to, contact The Pensions Advisory Service (TPAS) who offer free advice.
State Pension Age
The State Pension age is the earliest age you can start receiving your State Pension. It’s currently 66 for men and 66 for women, but it’s going up to 67 for both sexes by October 2026-28.
The earliest you can claim your State Pension is the first day of the month after your 66th birthday. You don’t have to wait until your State Pension Age to start saving into a private pension though.
Your National Insurance record
The amount of State Pension you get is based on your National Insurance (NI) record. You need at least 10 qualifying years on your NI record to get any State Pension.
You’ll usually need 35 qualifying years to get the full new State Pension. The number of qualifying years you need is reduced to 10 if you reach State Pension age on or after 6 April 2016.
If you have between 10 and 35 qualifying years, your State Pension will be a proportion of the full amount.
Calculating your State Pension Age (SPA)
Your SPA is the earliest age you can start receiving your State Pension. It’s important to know your SPA as it can affect how much you receive.
You can use the online calculator to work out your SPA. You’ll need your National Insurance number and the amount of qualifying years you have.
If you reach SPA before 6 April 2016, you’ll need 30 qualifying years to get a full basic State Pension. If you reach SPA on or after 6 April 2016, you’ll need 35 qualifying years.
For every year over your SPA that you have, you’ll get an extra 1/35th of the full basic State Pension.
Calculating your State Pension Amount (SPA)
The SPA is based on your National Insurance (NI) record. To get an estimate of your SPA, you can use the government's online calculator. You'll need information like how many years you've paid NI contributions and whether you have any gaps in your NI history.
The SPA is just one part of your retirement income, so it's important to plan for other sources of income as well. In addition to your State Pension Amount, there are a number of factors that could affect your future financial wellbeing such as inflation rates, life expectancy and market fluctuations.
For example, if you withdraw all the money from your retirement fund at once, it could result in a significant drop in living standards later down the line due to inflation or market crashes - whereas making regular withdrawals over time reduces this risk considerably.
Higher rate tax relief on your SPA
The standard personal allowance (SPA) is the amount of money you can earn each year before you start paying income tax. For the 2020/21 tax year, the SPA is £12,500.
This means that if you earn less than £12,500 a year, you won’t pay any income tax. If you earn more than £12,500 a year, you’ll pay income tax on the amount that’s over £12,500.
Work after age 65 with a contracted-out pension scheme (DEA)
If you reach State Pension age on or after 6 April 2016, the amount of State Pension you’ll get will be worked out using the new State Pension rules.
If you have a ‘contracted out’ pension scheme, this means you and your employer have paid lower National Insurance contributions than usual.
The amount of State Pension you’ll get under the new rules may be less than you expected because your ‘contracted out’ pension scheme gives you benefits that are at least as good as the basic State Pension.
To find out how much State Pension you could get, use the online calculator.
Extra Payments - Yearly Supplement and Cold Weather Payment
The amount of state pension you receive is based on your National Insurance (NI) contributions. If you have paid NI for at least 30 years, you will get the full amount of £155.65 per week.
You may also be eligible for extra payments on top of your basic state pension. These are called the Yearly Supplement and the Cold Weather Payment.
The Yearly Supplement is an extra £4.40 per week, paid for each year that you have paid NI contributions. So, if you have paid NI for 40 years, you would get an extra £176 per year - £3,360 in total over 20 years.
The Cold Weather Payment is a one-off payment of £25 to help with heating costs during cold weather.