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Retirement is something that many employees look forward to. However, not everyone wants to or can give up working when they reach State Pension age.
Here, we discuss the rules around State Pensions and what you can do to support employees with planning for their retirement.
The State Pension is a regular payment made to you by the Government once you reach State Pension age and is based on the National Insurance contributions you have made during your lifetime.
State Pensions should not be confused with personal pensions, which can be set up by individuals, or pensions provided by your workplace as part of the auto-enrolment scheme.
The State Pension age is the earliest age you can start receiving your State Pension and is determined depending on when you were born.
The current State Pension age is 67 years old. However, there is a gradual rise in State Pension age depending on when you were born:
The State Pension age is regularly under review and may increase again in the future.
You can check your State Pension age using this tool on the Government’s website.
For personal pensions and workplace pensions (auto-enrolment), the age will be agreed with the pension provider.
No. You can keep working for as long as you like after reaching State Pension age. The ‘default retirement age’ (a forced retirement age of 65) no longer exists and your employer cannot make you retire due to your age.
However, in some cases, an employer can stipulate a ‘compulsory retirement age’. If an employer does this, they must provide a good reason as to why, such as:
Yes. An employee can continue to work while claiming their State Pension as long as they meet the eligibility criteria for claiming a State Pension.
Once you reach State Pension age, you will no longer have to pay National Insurance. You can also request flexible working arrangements from your employer. You can find out more about making a flexible working request on the Government’s website here.
Basic State Pension
If you are a man born before 6 April 1951 or a woman born before 6 April 1953 and are eligible to receive a State Pension, then you can claim the basic State Pension of £137.60 per week.
To get the full basic State Pension, you usually need a total of 30 qualifying years of National Insurance contributions or credits. This means for 30 years, one or more of the following applies:
If you have fewer than 30 qualifying years, your basic State Pension will be less than £137.60 per week. You might be able to top up by paying voluntary National Insurance contributions. You can find out more about making voluntary contributions here.
New State Pension
Men born after 6 April 1951 and women born after 6 April 1953 will need to claim the new State Pension instead – currently £179.60 per week.
You will usually need at least 10 qualifying years on your National Insurance record to get any State Pension. These do not have to be 10 consecutive years. This means, for 10 years, at least one or more of the following should have applied:
If you lived or worked abroad, you might still be able to get some State Pension. You might also qualify if you have paid married women’s or widow’s reduced rate contributions. More about these can be found here.
State Pensions need to be claimed and are not provided automatically. You should receive a letter from HMRC no later than two months before you reach State Pension age explaining what to do.
You do not have to claim your State Pension. If you prefer, you can defer your State Pension and it will automatically be deferred until you claim it.
Deferring your State Pension could increase the payments when you do decide to claim it. However, any extra payments you get from deferring could be taxed.
You cannot get extra State Pension if you receive certain benefits. Deferring can also affect how much you get in benefits.
While State Pensions are a great benefit, they might not be enough to support someone through retirement if they decide to give up work.
Workplace pensions under the auto-enrolment scheme were introduced to help address this. As of November 2017, all employees aged between 22 and the State Pension age must be enrolled in a workplace pension scheme provided by their employer, unless the employee has decided to opt out. If an employee has decided to opt out, employers still have certain responsibilities. You can find out more about what to do by reading our blog What to do when an employee chooses to opt out of auto-enrolment.
If you would like to know more about how we can help you with pensions and auto-enrolment, or any other bookkeeping needs, please give us a call on 01892 559480, or get in touch via our online enquiry form.