What is the UK State Pension?
The state pension in the UK is currently in two parts; the basic state pension, and the additional state pension. Both depend on National Insurance Contributions (NICs) and are calculated differently.
This is dependent on the number of years you have paid NICs and is calculated based on a flat rate.
To claim a full basic state pension, you will need to have made 30 years of NICs (less for women reaching retirement age before 2020). If you have made less than 30 years of contributions, you will receive a reduced state pension. You are entitled to a portion of the state pension after just one year of working and paying NICs in the UK.
The Additional State Pension is a second pension based on your earnings and National Insurance Contributions (NICs). You get this automatically unless you have contracted out.
If you reach State Pension age on or after 6 April 2016 you won’t be eligible for the Additional State Pension, rather you will get the new state pension.
When can I claim my pension?
The age at which you can claim basic state pension is currently 65 years for men and 60 years for women. This is anticipated to further increase, for both men and women, to 68 years by 2044.
Can I claim UK State Pension while in another country?
If you have paid NICs in the UK you should be able to claim the UK State Pension even if you no longer live in the UK. However, the amount will depend on the number of qualifying years of NICs you have made, and the country in which you live.
If you live in an EEA country, you should be able to claim UK state pension which will increase in line with inflation, but if you go to a country outside the EEA your pension will not be inflation-linked unless there is a special agreement between the UK and your country of residence.
What other pension schemes are there?
As the state pension is relatively low, individuals are encouraged to pay into other pension schemes for additional retirement income. There are several types of schemes:
- Workplace pensions (also called occupational pensions or superannuation schemes). These normally involve contributions by both the employer and worker.
- Personal pensions: private schemes involving regular contributions by the individual to a pension provider. Some employers may also contribute to your personal pension.
- Stakeholder pensions: flexible pension schemes which permit variable payments rather than fixed amounts, with low management charges
It may be possible to transfer funds from an existing pension (in the UK or abroad) to a UK pension plan. This may not be profitable, however, particularly if you do not stay in the UK for long. You should contact your pension provider to discuss your options for transfer.