Retirement and the state pension

Find out about retirement and state pensions.

Retirement: an introduction

For many years the UK state pension age has been 65 for men and 60 for women, with employers allowed to operate a default retirement age preventing employees from working past 65. However, this default retirement age has been abolished and state pension ages were equalised at 65 in November 2018 and are scheduled to increase to 66 by October 2020.

You can only receive your state pension when you reach your state pension age.

Work out your state pension age with the Directgov state pension age calculator.

The default retirement age was abolished on 1 October 2011 meaning that fixed retirement ages from employment are a thing of the past, encouraging employees to work longer should they wish to. However it’s important to note that individual employers can still operate a fixed retirement age if they can “objectively justify” it.

If you decide to work longer and past your state pension age, and decide not to claim your state pension, you’ll be entitled to a larger state pension when you do stop working or can elect to claim it whilst still working. The same may apply to any occupational pension scheme benefits you have accrued if you work beyond the scheme’s usual retirement age. The longer you do not claim any personal pension then the fund, depending on investment returns and contributions, may increase and the older you are the better the annuity rates are likely to be.

Changing rules on State Pension Age

The state pension age for women has been increasing since April 2010 and in November 2018 became 65 for both women and men. It is scheduled to increase again between 2018 and 2020 to 66 and to 68 by 2039.

How your new State Pension is worked out

  • If you were still contributing to the State Pension prior to the 6 April 2016 you will qualify for a new State Pension on the new rules and your existing National Insurance record will determine your “starting amount”.
  • If you’re starting amount is lower than the full new State Pension, you can increase the value of your state pension with further qualifying years up until you reach State Pension Age.
  • You can do this even if you already have 35 qualifying years at the 5 April 2016, although you will not be able to increase your pension to more than the maximum amount of the new State Pension.
  • Each further qualifying year after 6 April 2016 will increase your starting amount by 1/35th of the full new State Pension (up to the maximum level). For example, if the new State Pension is £175.20 a week this would result in each qualifying year being worth £5.01 in extra weekly state pension (i.e. 1/35th of £175.20).
  • Your starting amount cannot be any less than your current entitlement. In some cases individuals will have a bigger state pension under the current rules than they would under the new rules. In such scenarios the bigger entitlement will be protected but there will be no opportunity to earn extra state pension.

You can apply for a State Pension statement at anytime online by going to https://www.gov.uk/check-state-pension.

The New State Pension is currently £175.20 a week (although you may potentially get more or less than this depending on your National Insurance record and any contracted-out service you built up before April 2016).

Boosting your State Pension

If it’s unlikely that you will qualify for the full new State Pension before State Pension Age you may be able to pay Class 3 Voluntary National Insurance contributions to boost your entitlement. Please go to https://www.gov.uk/pay-voluntary-class-3-national-insurance to check whether you can do this.

How to retire: next steps as you approach retirement

Four months before you reach state pension age you will receive a letter from the Pension Service. The letter will explain your pension options and you will need to respond to this if you want to claim your pension.

If you do not receive a letter, contact the Pension Service.

Options at State Pension Age

If you decide that you don’t want to draw your state pension on reaching State Pension Age you don’t have to.  In this scenario you can defer drawing your state pension and it will increase by 5.8% per year for each year that you defer claiming it.

State Pension increases in payment – The Triple Lock

Once your state pension comes into payment it will increase in value every year by the greater of the following:

  • 2.5%
  • Cost of living increases (as measured by the Consumer Price Index)
  • Increases in national average earnings

 

 

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