While it is not a huge or life-changing amount of money, your State Pension will likely form a significant portion of your income in retirement.
So, it is important to be aware of key issues relating to the State Pension, such as:
- Your eligibility
- When you will start to receive it
- How much you will get.
Here are five useful and perhaps surprising facts about the new State Pension that you should know.
1. The current maximum annual State Pension is nearly £12,000
The current full State Pension (as of the 2025/26 tax year) is £230.25 a week, which works out to an annual amount of £11,973.
Because it is cited as a weekly amount, the State Pension is paid every four weeks rather than monthly. So, you will receive 13 payments in a year.
It provides you with a handy guaranteed amount of income which can underpin other sources you may have in retirement.
Furthermore, you will receive payments for the rest of your life, and the amount will increase each year.
The current State Pension Age is 66, rising to age 67 between 2026 and 2028, and eventually rising to 68 between 2044 and 2046. You can check on the government website to see when you will be eligible to claim your pension.
2. The amount you will receive is based on your National Insurance contributions
To qualify for the full State Pension, you need to accumulate 35 “qualifying years” of National Insurance contributions (NICs) before your State Pension Age.
A qualifying year is a tax year (6 April to 5 April) during which you have paid sufficient NICs, or have been credited with contributions if you have been sick or unemployed.
You require a minimum of 10 qualifying years to receive any State Pension at all.
It is important to get a State Pension forecast to see how much you will be entitled to receive. You may have an incomplete National Insurance (NI) record if you were self-employed, for example, or spent some time living and working overseas.
If you have not made the necessary NICs, it is possible to purchase extra years to increase the amount of State Pension you will receive.
You can voluntarily fill gaps in your NI record for the last six tax years. This means that you have until the end of the current tax year on 5 April 2026 to cover any gaps going back to 2019/20.
3. The amount of State Pension you receive is protected by the “triple lock”
The triple lock, introduced in 2010, is designed to protect the value of the State Pension for retirees.
It means that the State Pension increases each year in line with the highest of these three measures:
- Inflation, as measured by the Consumer Prices Index (CPI) in September of the previous year.
- The average increase in wages across the UK between May and September of the previous year.
- A flat rate of 2.5%.
So, even if the rate of CPI and wage increases are nil, you will still benefit from a minimum increase of 2.5%.
The current Labour government has pledged to retain the triple lock for this parliament. This means that the State Pension will continue to increase each year in accordance with these criteria until at least the end of this parliament, which could be as late as July 2029.
4. Replacing the current State Pension could cost nearly £300,000
Because of the guaranteed increase each year, and the fact that you will receive it for life, the State Pension is a valuable benefit.
A good measure of the value is that, according to Fidelity, an annuity providing you with the same benefits would cost more than £210,000. Alternatively, you would need almost £300,000 of pension savings to replace the State Pension by flexibly drawing from a defined contribution (DC) pension.
Fidelity also calculated that to provide an equivalent fund of £300,000, you would need to contribute £234 a month to your pension from age 30 to a projected State Pension age of 68, assuming 5% investment growth each year.
Also, bear in mind the £234 figure assumes a State Pension at the current rate of £11,973. As this goes up each year, your contributions would have to increase at a similar rate.
5. You have to claim it, and can defer it to receive a higher pension
One quirk of the State Pension system that you may not be aware of is that you will not receive the payments automatically. Instead, you have to claim it yourself, and we would recommend you do this at least three months prior to your State Pension Age.
Alternatively, you can defer receiving your State Pension if you wish. As your State Pension will be taxed at your marginal rate of Income Tax, you may want to avoid claiming it unless you need the additional funds to cover your expenses. This prevents you from unnecessarily paying Income Tax on wealth you do not need to fund your chosen lifestyle.
Additionally, deferring until later in life could mean that you will be paying a lower rate of Income Tax when you do decide to start receiving your State Pension.
You will usually receive a higher payment too, as your State Pension increases by 1% for every nine weeks you defer. This works out at just under 5.8% for every 52 weeks deferred.
Your decision about when to claim will be driven by a number of factors, including whether you can afford to defer, and your tax position.
You also need to bear in mind that you will need to receive your State Pension for a certain period to make deferral worthwhile. According to MoneySavingExpert, the “breakeven point” is around 20 years.
We have previously written an article about the pros and cons of deferring which you may find useful.
Get in touch
If you have any queries about your own State Pension arrangements, or your retirement planning more generally, please get in touch.
You can email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
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.
The Financial Conduct Authority does not regulate tax planning.
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.