UK State Pension 2021: Everything You Need to Know About Your Retirement Income

Are you getting close to retirement age and want to know how much the UK state pension will be in 2021? Maybe you’re making plans for your future or helping a loved one understand their pension rights. No matter what, I have all the information you need about the UK state pension rates for 2021.

The Basics: How Much Will You Actually Get?

Let’s cut straight to the chase – the amount you’ll receive depends on which state pension system you fall under

New State Pension

The new State Pension is for men born on or after April 6, 1951, and women born on or after April 6, 1953.

For 2021/2022 The full new State Pension is £17960 per week

That works out to approximately £9,339.20 per year.

Old (Basic) State Pension

If you reached State Pension age before 6 April 2016, you’ll receive the basic State Pension instead.

For 2021/2022: The full basic State Pension is £137.60 per week

This gives you around £7,155.20 per year.

I remember when my dad retired a few years ago, he was quite surprised at the difference between these two systems. It’s important to know which one applies to you!

State Pension Increases for 2021/2022

The UK government uses a “triple lock” system to determine annual increases to the State Pension. This means pensions increase by whichever is highest:

• Inflation (Consumer Price Index)
• Average wage growth
• 2.5%

For the 2021/2022 tax year, the State Pension increased by 2.5%. This resulted in:

• New State Pension: Increased from £175.20 to £179.60 per week (a £4.40 increase)
• Basic State Pension: Increased from £134.25 to £137.60 per week (a £3.35 increase)

Do You Qualify for the Full Amount?

Not everyone gets the full State Pension amount. Your entitlement depends on your National Insurance contribution record.

For the New State Pension:

• You need 35 qualifying years of National Insurance contributions to get the full amount
• You’ll get a proportional amount if you have between 10 and 35 qualifying years
• You need at least 10 qualifying years to get any State Pension

For the Basic State Pension:

• You need 30 qualifying years of National Insurance contributions for the full amount
• You’ll get a proportional amount with fewer qualifying years

Additional Pension Components

The pension system can be pretty complicated when we look into it more, so let’s break it down into some more parts:

Category B Pension (for spouses/civil partners)

• Lower basic pension based on spouse/civil partner’s insurance: £82.45 per week

Category C or D Pension (non-contributory)

• For those who don’t qualify based on their NI record: £82.45 per week

Additional Pension

• Maximum additional pension (own and inherited): £180.31 per week

Graduated Retirement Benefit

• Graduated Retirement Benefit unit: £0.1447

Age 80 Addition

• Additional amount at age 80: £0.25 per week (yes, that’s just 25p!)

Transitional Arrangements

If you’re receiving the new State Pension but had built up entitlement under the old system, transitional arrangements may apply:

• Transitional rate below full rate: 2.5114% increase for 2021/22
• Protected payment: 0.50% increase for 2021/22

Pension Credit: Extra Help for Low-Income Pensioners

If your weekly income falls below certain levels, you might qualify for Pension Credit, which tops up your income.

Standard Minimum Guarantee (2021/22)

• Single: £177.10 per week
• Couple: £270.30 per week

Savings Credit

• Threshold (single): £153.70 per week
• Threshold (couple): £244.12 per week
• Maximum (single): £14.04 per week
• Maximum (couple): £15.71 per week

How to Check Your State Pension Forecast

If you’re wondering how much you personally will receive when you reach retirement age, you can check your State Pension forecast:

1. Online using the “Check your State Pension” service at gov.uk
2. By calling the Future Pension Centre on 0800 731 0175
3. By filling out form BR19 and sending it by post

We checked my wife’s forecast last year and discovered she had some gaps in her National Insurance record that we could fill with voluntary contributions.

When Will You Get Your State Pension?

The State Pension age has been gradually increasing:

• It’s currently 66 for both men and women
• It will increase to 67 between 2026 and 2028
• Further increases to 68 are planned between 2044 and 2046

You can check your State Pension age on the gov.uk website.

Claiming Your State Pension

The State Pension isn’t paid automatically when you reach State Pension age – you need to claim it!

You should receive a letter about 2 months before you reach State Pension age explaining how to claim. If you don’t get this letter, don’t worry – you can still claim in several ways:

• Online at gov.uk
• By phone: 0800 731 7898
• By downloading and sending form BR1 by post

Is the State Pension Enough to Live On?

This is perhaps the most important question. The full new State Pension of £179.60 per week (£9,339.20 per year) is below the minimum income standard that research suggests is needed for a basic acceptable standard of living in the UK.

Most financial advisors recommend additional retirement savings. Let’s look at the numbers:

I’m personally aiming for the “moderate” lifestyle, so I need to save enough to bridge that £11,460 gap each year.

Maximizing Your State Pension

There are several ways to increase your State Pension entitlement:

1. Fill Gaps in Your National Insurance Record

You can usually pay voluntary contributions to fill gaps from the past 6 years.

2. Defer Your State Pension

If you delay claiming your State Pension, you’ll get extra pension when you do claim it:

• For the new State Pension: Your pension increases by 1% for every 9 weeks you defer (about 5.8% per year)
• For the basic State Pension: Your pension increases by 1% for every 5 weeks you defer (about 10.4% per year)

3. Claim Credits for Caring

If you’re caring for someone or raising children, you might be eligible for National Insurance credits.

4. Check If You Qualify for Pension Credit

As mentioned earlier, this can top up your weekly income.

Final Thoughts

The UK State Pension provides a foundation for retirement income, but for most people, it won’t be enough on its own. The full new State Pension of £179.60 per week (£9,339.20 per year) for 2021/22 should be viewed as a starting point for retirement planning.

I’ve found that understanding exactly what I’ll receive has helped me plan better for retirement. Whether you’re years away from retirement or approaching it soon, knowing your State Pension entitlement is crucial for financial planning.

Remember that pension rules and rates change regularly, so it’s worth staying updated with the latest information from official government sources.

Have you checked your State Pension forecast yet? If not, it might be worth taking a few minutes to do so – you might be surprised by what you find!

Frequently Asked Questions

Q: Is the State Pension taxable?
A: Yes, the State Pension counts as taxable income, but you’ll only pay tax if your total income exceeds your Personal Allowance.

Q: Can I continue working while receiving the State Pension?
A: Absolutely! There’s no restriction on working while receiving your State Pension.

Q: What happens to my State Pension if I move abroad?
A: You can claim and receive your UK State Pension abroad, but it will only increase annually if you live in an EEA country, Switzerland, or a country with a social security agreement with the UK.

Q: Can I inherit my spouse’s State Pension?
A: You might be able to inherit part of your partner’s State Pension when they die, depending on when you and your partner reached State Pension age.

Q: How often is the State Pension paid?
A: The State Pension is usually paid every 4 weeks into your bank account.

Now you’re fully equipped with the knowledge about UK State Pension rates for 2021/2022. Happy retirement planning!