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A brief guide to the UK state pension

Recently moved to the UK? Chances are you’re doing your research into everything from healthcare to driving licences. And, if one of the things you might be curious to know about is the UK state pension, you’ve come to the right page.

Whether retirement is a long way off or you’re approaching that time in your life, it’s never too soon to arm yourself with the knowledge. What is the UK state pension anyway? How much are you entitled to? When can you get it? And how do you claim it?

Our quick guide to the UK state pension tells you everything you need to know.

What is the UK state pension?

The UK state pension is a regular payment from the government once you reach a certain age. Most people are entitled to claim when they reach the state pension age—in recent years, this has changed significantly due to increased life expectancies, and looks set to undergo more changes in coming years. At the moment, men born before 6 April 1951 and women born before 6 April 1953 can claim.

In addition to the UK state pension, anybody who reaches the criteria can apply for a bus pass for free travel. If you live in London, you can access free travel on buses, tubes and other transport from the age of 60. The same applies if you live in Wales. 

How much are you entitled to?

The amount of UK state pension you can receive depends on how many ‘qualifying’ years of National Insurance payments you have. This includes both the National Insurance Contributions (NIC) you’ve made while working and any credited contributions as a result of being unable to work. The most you can currently claim on the basic state pension is £137.60 per week (£7,155 a year).

The basic state pension increases every year by whichever is the highest of the following:

  • Prices—the percentage of UK price growth as measured by the Consumer Prices Index (CPI)
  • Earnings—the average percentage growth in wages in Great Britain
  • 2.5% 

The UK government website has a handy state pension forecast tool, which allows you to work out how much state pension you can get. 

Can I claim UK state pension payments as a migrant?

As a migrant, you can only claim UK state pension payments if you have either paid or been credited with UK National Insurance contributions. If you have, you should be able to claim for the benefit as soon as you reach the state pension age.

Even if you choose to retire outside of the UK, you will still be eligible to receive the state pension. However, this won’t be paid to you automatically—you will have to claim it. Instructions for how to do so should be mailed to you four months before you reach the state pension age. Alternatively, you can scroll down to the bottom of this page to find out today.

Does Brexit impact UK state pension eligibility?

Ah, now. This is where things get a little complex. When the UK officially left the European Union on 31 January 2020, the EU law no longer applied to the UK. This included legislation surrounding pension eligibility. If you reached the UK state pension age before 31 December 2020, your rights were unaffected. But chances are—since you’re reading this article—you’re not yet at retirement age.

So what does this mean for you? If you have already paid National Insurance contributions before 31 December 2020, then you will be able to access the ‘aggregation principle under the UK’s EU withdrawal agreement. 

To quickly sum up, this means that if you’ll have a minimum of 10 years of contributions across the UK and EEA member states then you will be eligible for some UK state pension payments. Again, this will be based on the actual years of contributions in the UK.

If you’ve just moved to the UK and your first NIC contributions date after 31st December 2020, you should still be able to benefit from the ‘aggregation’ principle. This should be in place at least until the end of 2035. To err on the side of caution, we recommend obtaining a statement of proof of NIC contributions and keeping it for your records. This can be accessed through your Personal Tax Account

Do you have to pay tax on your UK state pension?

The UK state pension is paid gross (without tax deductions)—however, it still counts as taxable income in the UK. Whether or not you have to pay tax on it depends on:

  • How much taxable income you have
  • Whether or not you’re a UK resident

The Low Incomes Tax Reform Group has a handy guide to what constitutes taxable and non-taxable income. To quickly summarise, you’ll likely have to pay tax on any taxable income that exceeds your personal allowance. This includes your UK state pension.

If you’re not a resident in the UK, you may not have to pay UK tax on your state pension. However, you may have to pay tax on it in the country you live in. Sometimes, you might have to pay both UK tax and the tax in the country you live in. 

Can you continue to work after you reach the UK state pension age?

Yes, of course! Just because you reach the state pension age doesn’t mean you have to stop working. You can continue to work for as long you like. If you choose to do so, you will no longer have to pay National Insurance contributions. You can also request flexible working arrangements if full-time hours will be too much for you at that point.

How do you claim state pension payments?

As mentioned above, you do not receive UK state pension payments automatically. You have to physically claim them yourself. There are three ways to do this:

Can you increase your state pension payments?

Yes! If you’re not eligible to receive the full £137.60 (or however much it’ll be at the point you wish to claim) or you want to receive more than this, you can increase your basic state pension payments. To achieve the full basic state pension allowance, you will have to have made at least 30 years of National Insurance contributions.

If there are gaps in your payments, you can choose to make voluntary NIC payments to increase your pension. You can also choose to defer your state pension, which could increase your payments by as much as 1% for every five weeks you defer. The extra amount you receive is paid with your regular state pension and can be claimed on top of the basic state pension amount.

You can also increase your basic state pension if you are married or in a civil partnership. You can check if you qualify for this on this state pension eligibility page.

Finally, your state pension allowance can also be increased by the Additional State Pension and Pension Credit if you’re on a low income. The latter also entitles you to further benefits including council tax reductions, heating cost assistance and housing benefits if you’re renting. The basic State Pension page on the Government website has more information on this.

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2021-06-28

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