Pension Expert Sessions

We all want a secure and comfortable future and planning it doesn’t have to be overwhelming. Although the word pension may sound scary, it’s a simple tax-efficient way to save money for your retirement.

The pension you get from the Government is called the State Pension. You get it when you reach State Pension age (A) but remember that you don’t receive it automatically, you need to claim it. 

You can check your State Pension age on the Government website. (1) Employers must now offer a workplace pension, so if you’re employed it’s likely you’re already enrolled in one. 

Every time you pay in the Government and your employer pays in too. To qualify for your employer’s workplace pension, you need to be aged 22 or over and earning £10,000 or above. However if you’re earning less than this it’s still worth speaking with your employer as they might enrol you and start contributing too. 

Even if you’re not earning anything, you can still pay in up to £2,880 a year which the Government will top up to £3,600 with tax relief. (B)

If you’re self-employed, you can take out a pension for your retirement too. You would have to arrange this yourself.

Regardless of your employment status, the earlier you start saving into your pension the better (C) as this gives your money more time to grow and over time, even small amounts can really add up.

You can normally only take money out of your workplace pension when you’re 55 or older. From April 2028 this is increasing to age 57.

You don’t normally get your State Pension automatically, you have to claim it when you reach retirement age. 

If you would like to find out more, visit the MoneyHelper website or visit the Scottish Widows website. 

State Pension is expected to make up most of the retirement income for around half of pensioners with 75% of pensioners saying it helps to pay for essentials such as food and utilities.*

So in this short video we will cover how much the State Pension is, how you qualify for it and when you’ll start receiving yours.

So What is the State Pension?

Well let me kick off with busting a myth – you don’t have a State Pension fund! Rather than this being a fund it’s actually a benefit, or entitlement that you accrue from the state over your lifetime and there are specific rules about how you accrue this benefit.

It’s completely different from your workplace pension or private pension and doesn’t offer much flexibility over how and when you take this but it’s a massive and very valuable part of most people’s income in retirement.

You become eligible for State Pension when you reach State Pension age.  This isn’t the same age for everybody but you can easily check your state pension age on the Government website, (1) for most people this will be some point in your late 60’s.  For me it’s 67.

Finding the age at which you are due to receive State Pension is easy as all you need to know is your date of birth.  You can’t take State Pension early but you can delay it if for example you are still working and would prefer it to start later, if you delay it you’ll get a boost to starting level of income.

 To find out how much you are on track to get you need your secure government gateway ID – if you don’t have this you can set it up online.

When you log in it will tell you how much you are on track to get and will show you your National Insurance record and importantly identify any shortfalls you may have. This is a really important piece of information, as it’s through your National Insurance record that you build up State Pension.

So how much is the State Pension and how do you qualify?

Well for 2025/26 The full New State Pension is rising to £230.25 per week, which is just under £12,000 per year (2), a rise of just over 4% on the previous year but the actual amount you will get depends on your National Insurance record.

If you’ve paid at least 10 years of National Insurance contributions, then you’ll qualify for some State Pension, if you have less than ten years you won’t normally get any State Pension although some overseas countries and the EU do have a social security agreement with the UK – so worth checking that out if you’ve been working overseas.

You need a total of 35 years of National Insurance Contributions or National Insurance credits to claim full New State Pension.

In both cases this includes if you’ve been paying National Insurance contributions as self-employed, or when you’ve been in receipt of certain benefits such as child benefit or carers credit.

If you do find you have a shortfall in your State Pension, you can usually pay voluntary contributions to cover the previous 6 years. The deadline is to make additional contributions is 5th April each year. 

This ability to make up for shortfalls in NI contribution history has got a lot of interest with the likes of Martin Lewis encouraging people to make up for their missing contributions, if you haven’t checked your record – just do this at the same time you are checking what State Pension you are on track to get.

There has been a bit of confusion about tax on State Pension in recent years – with some suggestions that it was now being taxed.  However, the rules have not changed, State Pension is part of your income in retirement and taxed like other earnings, if you get the full State Pension and that’s all your income in retirement – well at just under £12,000 per annum that’s just less than the standard personal allowance of £12,570 so there would likely be no income tax.

But if you have any other income, it’s likely to use up your personal allowance and mean you will be liable for tax on some of this additional income.

So that’s how you qualify and how much State Pension is – but what happens when you get to State Pension age? Well, you don’t normally get it automatically – you have to claim the State Pension.

After you’ve made a claim, you’ll get a letter advising you of your pension payments 2 months before you reach your State Pension age. If you don’t receive your letter, make sure you go to the Government website to make a claim.

The new State Pension is usually paid every 4 weeks into an account of your choice with payments paid in arrears, for the last 4 weeks, not the coming 4 weeks.  And remember under current rules, State Pension increases each year in line with something called the triple lock which gives some protection from inflation.

So there it is – get on top of your State Pension entitlement, it plays a massive role in most people’s retirement income and finding out what you are entitled to and when you’ll get it is pretty straightforward and really worth your while.

For more information on the State Pension, visit the Government website.

One of the key benefits of paying into a pension is that Pensions are a really tax efficient way of saving for your long term future. This is because you usually get tax relief on your own pension contributions, which reduces their cost.  Tax relief means you get back some of the tax you paid on your earnings when you pay into your pension. That’s why they can be such an effective way to save for your retirement. 

Tax benefits can be applied in a number of different ways. You can check with your pension provider how this works for the type of pension you are in 

(1)One way is through what is known as tax relief at source. This will apply if either pay your own contributions from your bank account or your employer deducts them from your after-income-tax earnings. This means, if you pay an £80 contribution, the Government tops this up to £100, so you get 20% basic rate tax relief.

With this type of pension, you usually get 20% tax relief even if you don’t pay tax or pay the Scottish 19% starter rate. 

If you pay any income tax at a higher rate than 20%, you need to claim the rest of your tax relief, usually by completing a self-assessment tax return. 

(2) With some other types of workplace pensions your employer deducts your pension contributions from your earnings before working out your income tax. This is known as net pay tax relief. 

This reduces the cost of contributing £100 to £80 if you pay tax at the 20% basic rate tax, or to £60 if you pay at the 40% higher rate tax – and so on. 

At the moment low earners in Scotland might only get 19% tax relief rather than 20%. And it’s worth remembering you don’t get any tax relief on contributions paid out of income within the personal allowance, which is currently £12,570.

If this affects you, the Government has announced that you’ll be able to claim a top up equivalent to the tax relief you miss out on from 2025/26, but this won’t cover tax years before 2024/25. 

(3) Finally, there’s Salary exchange – In this scenario you agree to reduce your earnings in exchange for your employer increasing the pension contributions it makes for you. As the result you don’t pay tax or national insurance on the amount you have exchanged. If you pay any extra contributions outside of the salary exchange, you would get tax relief on these amounts in line with the type of pension scheme you’re in.

For more information visit the MoneyHelper website.

You now have a number of options available to you when it comes to taking your pension benefits. You can take flexible drawdown, (1) a guaranteed income for life, known as an annuity  or you can take it all in cash. Or you can leave it for now by deferring your pension. (A) You can even do a  mixture of all of these. Our website has loads more information on what these options mean. (2)  

You can usually take your pension benefits from the age of 55 . (B) Your pension provider should get in touch with you four to six months before you’re due to take your pension so they can explain the process. But if they don’t get in touch, do contact them and they can tell you your options.

If you’re considering taking your pension benefits, then the best thing to do is to speak to your  pension provider, or visit the MoneyHelper website. (3)  If you’re over 50, you can access the Government’s Pension Wise service on the MoneyHelper website where you can book a free appointment to get some guidance.

You’ll usually also receive a State Pension, but you likely won’t be able to claim this until you are in your late 60s. (C) -  So if you are planning to retire before then, this is something you’ll need to take into account. You can find out when you can receive the State Pension on the Government website. 

With State Pension, remember you won’t get your pension automatically, you’ll need to claim for it. (4)  You usually get a letter around about four months before you reach State Pension age telling you what you should do. If you don’t get a letter by three months before you’re set to retire, phone the claim line (5) or visit the Government website. (6)

[We know financially this is a difficult time for many people, which can put pressure on household finances. ]

[We know keeping on top of your finances can be tough, particularly with the current rising cost of living affecting many of us and putting pressure on household finances.]

If you’re still able to afford to pay into your pension, but are concerned about how the markets are behaving it’s worth remembering the benefits of investing in a pension.

When you save into a pension, you benefit from tax relief, meaning that you get your tax back from the Government as a reward for saving for your future. 

To try and ensure people start saving for their retirement the Government introduced auto-enrolment in 2012. Your employer enrols you in your workplace pension scheme and both you and your employer pay in a percentage of your salary.  The minimum contribution is 8% of your qualifying earnings, this means your employer pays in 3%, and you normally pay in 4% and get 1% tax relief from the Government.

If you are in a workplace pension scheme and choose to come out of the scheme, your employer will have to re-enrol you into the scheme. – the exact date you will be re-enrolled will be anything from 1 year to 4 years after you come out of the scheme.

 If you opt-out of your workplace pension you’d miss out on these extra payments on top of your own payments into your pension. You should check with your employer if you’re unsure of their contributions or if you want to make any changes to your pension payments.

One of the benefits of regularly investing smaller amounts is that this helps average out the costs over time. If you’re investing long term, such as in a pension, buying units when they’re cheaper can actually work out to be good value in the long run.

Now if you do want to stop paying into a pension you can do that at any time but you should consider the long term implications to your pension savings. There are other options available such as lowering your payments or taking a payment holiday for up to 6 months.

If you’re considering making any changes to your pension, it is important to consider them carefully, bearing in mind your long term objectives. A pension is designed to support you when you retire and any decision you make now can have considerable impact years down the line. We recommend you seek financial guidance or advice before making changes to your pension. 

For bespoke advice tailored to your finances, you can speak to a financial advisor. If you don’t have a financial adviser you can find one on the unbiased website. (1)  They’ll normally charge for any advice given.

For free and impartial guidance you can trust, MoneyHelper (2) can help. They’re a Government backed organisation which has a number of helpful resources on their website including budgeting tools and a pension calculator that can help you see how much you’ll need in retirement.