Basically, it’s money the government gives you once you hit the state pension age.
For people born before 5 April 1960, their State Pension age is 66. For everyone born after this date, their State Pension age is increasing to 67 and will eventually increase to 68.
In theory, it’s a way of rewarding you for a life of work, so you have money in the bank when you’re old and grey. The current full rate of new State Pension is £221.20 a week.
However, it’s not really free. It’s based on how much you pay in National Insurance Contributions across your working life. You know that horrible moment when you look at the tax on your pay slip and you see that other bit called, ‘N.I. contributions,’ and think, “WAIT A MINUTE, THERE’S MORE TAX?!”. 😡
This is money that’s going towards your state pension.
To be entitled to the minimum amount of State Pension you need 10 qualifying years and for the full amount you need 35 qualifying years.
A qualifying year is one in which you were:
Working and made National Insurance contributions
Getting National Insurance credits for example if you were unemployed, ill or a parent or carer
Paying voluntary National Insurance contributions
With the State Pension age being quite late and maximum payment currently sitting at £221.20 a week, it's all the more important to track down the private pensions you have held through your employers and properly forecast and plan for a happy retirement. That's where Penny comes in. 😎
Please note: The State Pension is subject to change. To find up-to-date and in-depth information you can visit the Government Website.