4 things you need to know about your State Pension before you retire

When would you like to be able to retire? It might be a question you’ve known the answer to for a while, or one you’re still pondering.

Whenever you’re aiming to retire, one of the key dates to include in your plan is the age when you can access your State Pension. Even if you don’t intend to rely solely on your State Pension for retirement income, it can provide a helpful boost to your other savings and investments. As such, it could play a crucial role in helping you to draw a sustainable income and live a comfortable lifestyle in retirement.

Despite this, research from Standard Life has revealed that a quarter of UK adults don’t know their State Pension Age. This includes 10% of people aged 55 to 64.

Read on to learn four crucial pieces of information about the State Pension that might influence your financial plan.

1. The State Pension Age is 66 and will rise to 67 between 2026 and 2028

The State Pension Age is the earliest that you can access your State Pension. The government holds regular reviews into the State Pension Age to ensure it is appropriate given any changes to life expectancy and other relevant factors.

In 2023/24, the State Pension Age is 66, but this is due to rise in the coming years. The current plan is that it will rise to:

• 67 between 2026 and 2028

• 68 between 2044 and 2046.

The next review into proposed changes to the State Pension Age is likely to take place before March 2025. If new data suggests that the plan needs to change, the government has committed to giving at least 10 years’ notice so that you can plan your retirement effectively.

2. The full State Pension is £10,600 a year in 2023/24 and will rise by 8.5% from April 2024

In the 2023/24 tax year, the full new State Pension is £203.85 a week. This amounts to an annual income of £10,600.

The government has committed to the triple lock, which is an agreement to increase the State Pension every year by the highest of these factors:

• The average increase in prices as measured by the Consumer Prices Index in September of the preceding year

• The average increase in wages, measured in July of the preceding year

• 2.5%.

Any increases take effect from the start of the tax year and apply to everyone who receives the State Pension.

The government has announced that the State Pension will increase by 8.5% from April 2024, boosting the weekly amount you could receive to £221, an addition of more than £900 a year.

3. Find out if you are likely to receive the full State Pension based on your National Insurance record

The amount that you will receive in State Pension depends on how many years of National Insurance credits you have built up over the course of your life.

Under the new State Pension, you’ll need at least 10 years’ worth of credits to qualify for the minimum amount, and to receive the full State Pension you will need 35 years’ worth.

You add credits to your record when you pay National Insurance on your income or if you receive National Insurance credits, such as if you are on maternity leave, caring for grandchildren, signed off work due to illness or injury, or if you are caring for a relative.

You can use the government website to discover how many years of National Insurance credits you have on your record, and how much State Pension you may be eligible for in retirement. If you are missing some years, it may be possible to buy additional credits to ensure you are eligible for the full State Pension.

You can learn more about how to check your National Insurance record and whether it might be beneficial to buy additional credits on our website.

4. You can defer your State Pension if you don’t want to take it as soon as you qualify

At least two months before you are eligible to take your State Pension, the government will contact you to ask if you would like to take it. What many people may not realise is that you can defer your State Pension if you would like to.

This might be something you consider if you are still earning and don’t need your State Pension yet.

The first reason for doing so is that, if you take your State Pension while still earning, it could increase the amount of taxable income you receive each year. Deferring it might be a more tax-efficient option for you.

Another upside is that, by deferring it, you could receive larger payments provided you defer it for a minimum of nine weeks. Your State Pension increases by the equivalent of 1% for every nine weeks that you defer. This means that, if you are eligible for the full State Pension and you defer it for a full year, you’d add £11.82 to your weekly income when you do take it.

Deferring your State Pension isn’t right for everyone, so it may be helpful to consult a financial planner before making your decision.

Get in touch

If you’d like to learn more about how your State Pension could support your retirement goals as part of your wider financial plan, we can help.

Email theteam@fortitudefp.co.uk or call us on 01327 354321.

Please note

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.