What age can I retire?

The State Pension Age

This is something of a ‘moving feast.’   With the maturing of the ‘Baby Boomer’ generation – that is people born between 1946 and 1964, in the post war years, there are now more people aged over 60 in our population than there are under 16’s.

With this in mind, life expectancy has also increased and we’ll all spend a larger proportion of our adult lives in retirement than previous generations.

• When the state pension was introduced in 1948, a 65-year old could expect to spend 13.5 years in retirement – about 23% of their adult lives.
• In 2017, a 65 year-old could expect to spend 22.8 years in retirement – about 33.6% of their adult lives.  The Office for National Statistics reveal that by 2042, 12.4 million people will be over state pension age – an increase of 33% over a period of 25 years. 
• The Pensions Act 2014 requires the Government to review the state pension age every six years.   Currently, the state pension age depends on when you were born. 
• The current basic state pension age for both men and women is 66 and 2 months for people born in 1955 and this will gradually rise by 2 months a year until it reaches 67. 
• It’s not good news for younger people… proposals indicate those approaching pension age in 2034 will not get a state pension until they are 67 and in 2044, the age will increase to 68 – and the Government has plans to bring this forward.

What types of state pensions are there?

There are two types of state pension, which applies to you depends on whether you reached state pension age before the new state pension came into force – the new state pension and the old basic state pension.

The Basic State Pension (also known as 'The Old State Pension')

This is a regular payment from the Government based on your previous National Insurance contributions and you receive this if you reached state pension age on or before April 2016 – that is, if you are a woman born before 5 April 1953 or a man born on or before 5 April 1951.  

The basic station pension includes two parts:

• A basic state pension based on your previous National Insurance Contributions.
• An additional state pension also based on your National Insurance contributions but this takes into account your earnings and whether you claimed benefits too.
• If you have fewer than 30 years of contributions you’ll get 1/30 of the full state pension amount for each year of contributions.

The New State Pension

The new state pension is a regular payment from the Government that most people can claim in later life. You can claim this at state pension age if you have at least 10 years National Insurance contributions and are:

• A man born on or after 6 April 1951
• A woman born on or after 6 April 1953

How much is the state pension?

In April 2023, the full state pension went up to £203.85 a week and whether you get the full amount depends on your qualifying years of National Insurance payments.  

There are a number of pension income calculators online – have a look at www.agepartnership.co.uk or www.gov.uk – to check your state pension. There is an online form that you can send to the Department of Work and Pensions and they will send you a letter confirming the amount of pension you should receive.

Will I automatically receive my state pension when I reach the age of 66?

The answer to this is ‘no.’  You should receive a letter about two months prior to your 66^th birthday and you must confirm that you wish to claim your pension.

Can I claim my state pension and keep working?

Yes, you can claim your state pension and keep working – but bear in mind:

• Any money you earn won’t affect your state pension but it may affect your entitlement to other benefits such as pension credit, housing benefit and council tax support.
• Your state pension is taxable so when added to your earnings it may put you into a higher tax band.
• When you reach state pension age, you won’t have to pay National Insurance anymore, even if you keep on working.

Should I defer my state pension if I choose to keep working?

Do seek advice from a pensions specialist but we believe that any pensions specialist will generally tell you not to defer your state pension. 

If receipt of your state pension will push you into a higher tax bracket, it may be possible to set up a personal pension plan and pay your state pension into this.  You will be able to draw money from this when you need to do so – particularly when you decide to stop working.  You will be able to withdraw money up to a certain amount without having to pay tax on it.  Another benefit of doing this is that if you die, your heirs will inherit the money from the pension plan. 

What if I want to retire early?

Just because you won’t get a state pension, it doesn’t mean you can’t retire. Personal and workplace pensions can usually be claimed from the age of 55. If your pension is enough to fund your retirement, then you’ll be able to retire early.

If you retire at 55, assuming you have an average life expectancy you will need your assets to produce an income for a longer period than someone who retires later – so retiring early means you need to have other sources of income you can use.

What happens to my pension if I work past retirement?

You can claim your pension if you continue to work – if you do decide to defer your pension until you stop working, then you’ll receive larger pension payments when you do claim – but do speak to a pensions advisor as previously mentioned as this may not be the best course of action.

If you’re looking to claim a personal or workplace pension while working, other rules may apply – and this could depend on the terms of your workplace pension you agreed when signing up.

How much money will I need for retirement?

Again, this depends on you and your personal circumstances.  You need to think about basic living costs – mortgage if you’re still paying one, service charges, hobbies, travel, car or home repairs and long-term health care.

Where can I get more information on pensions?

The Money and Pensions Service is an independent organisation that gives free information and advice on pension planning, including state, personal, workplace and stakeholder schemes.