Understanding the State Pension: what it is and how it works

Understand how the State Pension works alongside your defined benefit pension

Retirement planning can feel like a maze but understanding your State Pension is a ‘must’ step. Whether you’re already drawing from your pension or planning ahead, having the full picture of what you get from the State Pension can help you make informed decisions about your financial future.

About the State Pension

The State Pension is a regular payment from the UK government that you can claim once you reach State Pension age. It’s designed to give you a basic income in retirement, whether you’re working with other savings or relying on it as a main source of income.

Whichever camp you sit in, it’s a significant piece of the puzzle. It’s calculated weekly, but paid every four weeks in one payment to keep things simple.

How much you’ll get

The amount you get depends on your National Insurance (NI) contributions. Essentially, the more NI contributions you’ve made during your working years, the higher your State Pension. As of November 2024, the most it pays is £203.85 per week.

If you reached State Pension age before 6 April 2016, you’ll be on the basic State Pension, which has slightly different rules and amounts. If you’re unsure about your exact entitlement, you can use the government’s online State Pension forecast tool – it’s free and straightforward to use (see ‘Handy resources’ below).

When you can start to receive the State Pension

The age you can start to receive your State Pension will depend on the year you were born. As of November 2024, the State Pension age is 66 but is set to rise to 67 and then 68 in the coming years. It’s a good idea to check your own State Pension age on the government website, especially if you’re planning out your retirement timeline (see ‘Handy resources’ below).

If you’re already at retirement age, you likely know what age you qualified at, but for those planning ahead, having a solid date in mind helps.

How to claim the State Pension

For those who haven’t yet started claiming, you’ll need to apply for your State Pension – it won’t automatically kick in. The good news is that it’s a pretty simple process. Around four months before you reach State Pension age, you should get a letter from the government with details on how to apply. If you don’t receive a letter, you can apply online, over the phone, or by mail.

For those who are already receiving their State Pension, you don’t need to worry about reapplying each year. However, if you’d like to increase your payments, there are options to delay your State Pension and receive a higher amount later. This can be a good choice for some, so it’s worth exploring.

Boosting your State Pension

If you’ve found out that your State Pension will be lower than expected, there are a few ways to top it up. If you have gaps in your record of NI contributions, one way is to make voluntary NI contributions. Each additional year of contributions can help increase what you receive.

Another option is to delay when you start taking your State Pension, which can in turn increase the amount when you do start claiming. It’s a choice worth considering, especially if you’re working or have other sources of income in retirement and don’t need the money from the State Pension right away.

The State Pension and your other pensions

You might be wondering how the State Pension impacts other sources of retirement income, like your Canada Life pension. The good news is that they work alongside each other and having one won’t reduce the other. They’re separate benefits, designed to complement each other to provide a more secure financial future.

The State Pension is there to give you a dependable income in retirement. Whether it’s your main source or one part of your retirement income, it’s there to help financially support you through this stage of life.

Handy resources

Check out these resources to help you get the full low-down on State Pensions:

State Pension Forecast: Use the government’s State Pension Forecast service to find out how much State Pension you’re likely to receive and check your National Insurance record. Or you can call their Future Pension Centre on 0800 731 0175.
State Pension Age Calculator: Check when you’ll reach State Pension age with the State Pension Age Calculator on GOV.UK.
National Insurance Voluntary Contributions: Learn how to top up your State Pension by making voluntary contributions. Visit the government’s National Insurance Voluntary Contributions page.
MoneyHelper: For unbiased, easy-to-understand guidance on pensions, savings, and financial planning, visit MoneyHelper or call them on 0800 011 3797.