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Latest News Understanding your state pension

Understanding your state pension

Calculating state pension

This article was updated July 2022.

There is still a lot of confusion around the subject of the state pension. In 2016, the rules were radically overhauled and many people are still in the dark about what they’ll be entitled to when they retire and what they can do to maximise the benefits when the time comes.

Check your pension forecast

It’s for this reason that the government is providing a state pension forecast. Anyone can apply to find out roughly what they can expect and when, based upon their current circumstances. This can be done by post or online. However, the process is still quite complex and the answers may not be that helpful. You may find that you’re not entitled to as much as you thought and still be unsure about what you can do to improve that situation. Independent personal pension advice may be the best way to establish exactly what your options are.

Current pension rules

The current rules apply to men born after 1951 or women born after 1953. You need to have 10 years of national insurance (NI) payments to qualify for a state pension and 35 years of NI to receive the full amount – currently £185.15 per week. It is possible you might get more than this if you’ve been paying in for longer, but if you have gaps in your NI contributions, or you “contracted out” at any point, you’ll probably receive less.

Contracting out

Contracting out isn’t an option under the current system, but before April 2016 there were many ways you might have paid reduced NI contributions, often as part of a workplace plan, such as a final salary or defined contributions scheme. If you were in one of those schemes your NI contributions will probably have increased as these were phased out.

Working longer

The amount of pension you are paid will also depend on the age that you opt to take it after the statutory entitlement age. Many people are expected to choose to stay working for longer in order to secure a bigger pension when they do retire. You can also pay voluntary NI contributions or apply for NI credits to fill any gaps in your record.

Alan Boswell & Company is able to offer fully independent financial advice in order to help you make the right decisions regarding your state pension and whether paying into a personal pension scheme is a good idea for you. Contact us today to find out how we can help you understand your forecast and make the best of your situation, whatever the outlook.

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