A Guide To State Pensions

Most people get a bit hot under the collar when it comes to thinking about the future. Sorting out your pension plan is an important step in making sure that you are comfortable when you reach retirement age, but it can be confusing. However, even with a basic knowledge of the state pension you could soon be on your way to a more relaxed old age.

What Is a Pension?

A pension is an arrangement to provide you with an income when you are no longer in employment. It is important not to confuse pensions with severance packages (a lump sum paid at the termination of employment), a pension is granted when you retire and is a regular income set up in instalments. Retirement plans (or pension schemes) come in all shapes and sizes, but there are 2 main ones; state pensions and private pensions.

How Does a State Pension Differ From The Rest?

A state pension is paid by the government to people who are at retirement age. Although some people may not be eligible, it ensures that most people are comfortable when they retire. Rather than be saved up directly by the person, it is paid through National Insurance contributions. In order to claim for a state pension you need to be 65 if you are male or 60 if you are female and no longer in employment. You also need to be credited as having paid your National Insurance contributions throughout your lifetime, which is broken up into ‘qualifying years’. You need roughly 49 qualifying years in order to claim a state pension.

As of 2009 you will be able to receive £95.25 a week, with a 25p addition if you are over 80. If you have dependants, you will qualify for an increase. You can also hold off from paying your pension and receive it later if you wish.

How Do I Claim My State Pension?

You will be sent an invitation to claim your state pension 4 months before you reach the required age. You should contact The Pension Service if you have been waiting for a month or more for your invitation. You can also claim your state pension over the phone, which is faster than doing it by post (0800 731 7898). Most of the time, the details of your entitlement will be given to you at the end of the call. They will need to know your national insurance number, tax reference number, your employer’s details and your bank details (although they may ask for additional information).
The Pension Service is generally very efficient and will get your first instalment to you right on time.