Two systems: new and old
In brief: The UK State Pension is a government-provided income in retirement, funded by National Insurance contributions. If you reached State Pension age on or after 6 April 2016, you are on the new State Pension — a simpler, flat-rate system. Understanding how it works, when it starts, and how it interacts with your other income is essential for any retirement projection.
The current State Pension system depends on when you reach State Pension age.
New State Pension
If you reached (or will reach) State Pension age on or after 6 April 2016, you are on the new State Pension. This is a flat-rate system — the full amount is the same for everyone who qualifies, regardless of earnings history. It replaced the more complex old system.
Old State Pension
If you reached State Pension age before 6 April 2016, you are on the old system. This consisted of a basic State Pension (up to £169.50 per week in 2024/25) plus an earnings-related top-up called the State Second Pension (S2P), which replaced the earlier SERPS. The old system is more complex and varies significantly between individuals.
Most people planning retirement now will be on the new State Pension, so the rest of this article focuses on that system.
Qualifying years
Your State Pension amount depends on your National Insurance (NI) record. You build qualifying years by:
- Working and earning above the Lower Earnings Limit (£6,396 in 2025/26) — NI contributions are credited automatically
- Receiving certain benefits — such as Child Benefit (for children under 12), Carer's Allowance, or Jobseeker's Allowance, which provide NI credits
- Making voluntary contributions — Class 3 NI contributions (£17.45 per week in 2025/26) to fill gaps in your record
You need:
- 35 qualifying years for the full new State Pension
- At least 10 qualifying years to receive any State Pension at all
If you have between 10 and 35 qualifying years, your pension is proportionally reduced. For example, 28 qualifying years would give you 28/35 = 80% of the full amount.
You can check your NI record and State Pension forecast at gov.uk/check-state-pension. This is one of the most useful free tools available — it shows how many qualifying years you have, any gaps, and what your projected pension will be.
The full amount
The full new State Pension is £11,973 per year (2025/26), which works out to approximately £230.25 per week. It is paid every four weeks directly into your bank account.
The triple lock
The State Pension increases each April by the highest of:
- Average earnings growth (across the whole economy)
- CPI inflation (the Consumer Prices Index)
- 2.5% (the minimum floor)
This "triple lock" has been government policy since 2010. It means the State Pension has generally outpaced inflation, increasing its real purchasing power over time. However, the triple lock is a policy commitment, not a legal guarantee — future governments could change or remove it.
Contracted out deductions
If you were a member of a workplace pension that was "contracted out" of SERPS or S2P (common before April 2016), your new State Pension starting amount may be reduced. This is because your employer's scheme was providing benefits in place of the additional State Pension, and NI contributions were lower as a result.
The deduction can be significant. Many people who check their State Pension forecast are surprised to find it is below the full amount, even with 35+ qualifying years, because of contracting out. Your State Pension forecast on gov.uk will show your estimated amount including any deductions.
State Pension age
The age at which you can claim your State Pension is set by law and has been rising:
| Born | State Pension age |
|---|---|
| Before 6 March 1961 | 66 |
| 6 March 1961 to 5 April 1977 | 67 (phased in by 2028) |
| After 5 April 1977 | 68 (currently planned for 2046, subject to review) |
State Pension age is periodically reviewed and could change. You can check your personal State Pension age at gov.uk/state-pension-age.
The gap between when you stop working and when your State Pension starts is one of the most important variables in any retirement projection. If you retire at 58 and your State Pension starts at 67, that is nine years where your pension pot must cover all living costs without State Pension support.
Deferral
You do not have to claim your State Pension as soon as you reach State Pension age. You can defer it, and your pension will increase for every week you delay.
How much extra?
Your State Pension increases by approximately 1% for every 9 weeks you defer, which works out to roughly 5.8% per year. This increase is not compounded — it is a simple addition to your weekly rate.
Example: Deferring the full new State Pension (£230.25/week) for one year would add approximately £13.36 per week, giving you £243.61 per week when you do start claiming.
When deferral makes sense
Deferral may be worth considering if:
- You are still working and do not need the income immediately
- Claiming would push you into a higher tax band
- You are in good health and expect to live well beyond average life expectancy
The "break-even" point — when the extra income from deferral outweighs the income you missed by not claiming — is typically around 17 to 19 years after your State Pension age. If you defer for one year starting at age 66, you would need to live to approximately 83 to 85 to come out ahead financially.
Tax treatment
The State Pension is taxable income. However, it is paid gross — without any tax deducted at source.
This means your State Pension uses up part of your Personal Allowance (£12,570 in 2025/26). At the full rate of £11,973, the State Pension alone sits just below the Personal Allowance. Any other taxable income on top — even small amounts of pension drawdown, rental income, or interest — will start being taxed.
This interaction is important. Many people assume the State Pension is tax-free because no tax is deducted when it is paid. It is not tax-free — it simply uses up most of your tax-free allowance, meaning other income is taxed from almost the first pound.
If you have multiple income sources, HMRC adjusts your tax code so that the right amount of tax is collected through your other income (for example, from a private pension provider or employer). This can sometimes cause confusion when pension providers deduct more tax than expected.
Survivors and inherited State Pension
The rules on inheriting State Pension depend on which system applies.
New State Pension
Under the new system, inheritance provisions are limited. You cannot inherit your spouse's or civil partner's new State Pension. However, if your spouse or civil partner had a "protected payment" (an amount above the full new State Pension rate, based on their pre-2016 NI record), you may inherit a portion of that.
Old State Pension
Under the old system, a surviving spouse or civil partner could inherit up to 50% of the deceased's additional State Pension (SERPS/S2P), depending on when the deceased reached State Pension age. The basic State Pension could also be inherited in some circumstances.
Given the complexity of these rules, checking your specific entitlement with the Pension Service (part of the Department for Work and Pensions) is advisable if this applies to your situation.
These projections are for modelling purposes only. They do not constitute financial advice. Tax rules are subject to change. Please consult a qualified financial adviser before making financial decisions.