"The State Retirement Pension
aka The Basic State Pension
is a Guaranteed Income
Paid Regularly to Qualified Individuals"

"This Contribution-Based Pension is Paid At Regular Intervals After The Qualified Individual Has Reached Retirement Age"

Introduction

The State Retirement Pension in the UK, at the time of writing this, is about £130 per week (if you were born before 1951 for men and 1953 for women.  It increases to just over £164 per week for both men and women if born after these dates).

That's it.

One Hundred and thirty measely pounds per week.

Yes, there can be a few add-ons, depending on your age, pension credits, etc. but the basic weekly pension is around £130. 

There is a "little" bit of good news.  It is (generally) paid every four weeks.  Which means, that you receive 13 payments per year and not 12, which would have been the case had we all been paid monthly.

Let us not forget why we have the state pension.  It's relatively recent.  It was devised to prevent poverty in old age.  At £130 a week it probably prevents poverty, but falls way short of providing for anything else.

The age of official retirement (pre 2010) was 65 for men and 60 for women.

And now, since 2010, the age for women is gradually being synchronised with that of men. 

Both men and women's State Retirement ages are, at the time of writing, in the process of rising to 66.  And between the years 2026 and 2028 they will both rise to 67.

Going further, the age of retirement for both men and women will become 68 by 2046 (or sooner).

How long will it be before that age creeps up to 70? 

The caption below was an actual headline in one the dailies. 

Frightening. Or what?

RETIREMENT RAGE

Opposition fury as millions may have to wait until age of 75 to draw pension

"A Little Bit of History"

The "Old Age Pension" as it was called in those days was introduced in 1909.  It was the equivalent of £26 for singles and £39 for couples (all in today's money equivalent).  And not payable until aged 70.

Phew!  Hard times.

At around the same time as the Old Age Pension Act, a second reform called the Poor Laws was commissioned in 1905-09 - a first step towards a system of social security and then came the National Insurance Act of 1911 offering unemployment and health insurance.

It wasn't until after the Second World War that universal coverage of social security was addressed via the National Assistance Act of 1948.

In the 1990s along came the Pension Schemes Act of 1993 and the Pensions Act of 1995.

In 2002 the Pensions Commission was established to review pensions in the UK.

Quickly followed by further Pensions Acts in 2007, 2008.

The Pensions Act of 2011 amended the timetable for the increase of pensionable age to 66.

The latest news we have is that both men and women will retire at 67 by 2026 and 2028

"Some Background To
The State Retirement Pension"

There are two types of State Retirement Pension:

1. The Basic State Pension (BSP) is payable to men born before 6 April 1951 and women born before 6 April 1953.    [Currently, this is £125.95 per week].

2. The New State Pension is payable to men born on or after 6 April 1951 and women born on or after 6 April 1953. [Currently this will be £164.35 per week].

The Basic State Pension included:

  • The Graduated Retirement Benefit (which ran from 1961 to 1975),
  • The State Earnings Related Pension Scheme (SERPS) (ran from 1978 to 2002)
  • The State Second Pension (S2P) (introduced in 2002)

The above three "additional pensions" were voluntary.  You could contract out (COD) if you wanted to (see example below)

The State Retirement Pension is a "contribution-based" benefit.  Which means it depends on how much National Insurance (NI) contributions have been made over an individual's working life.

For a Basic State Pension the individual must have paid into the system for 30 years.

For a New State Pension the individual must have paid into the sytem for 35 years.

Smaller (pro-rata) pensions will be paid to individuals with less than the qualifying amounts.

Take a look at a typical pension of a male, born before 6 April 1951:

Basic State Pension                                                                  £134.25

Pre 97 additional State Pension                  £41.30
less Contracted-Out Deduction (COD)        £25.40

Total payable                                                                             £15.90

Post 97 additional State Pension                                              £  4.74
Graduated Retirement Benefit                                                   £ 4.91

The amount payable each week is:                                           £159.80

Now take a look at a female, born before 6 April 1953:

Basic State Pension                                                                  £134.25

Pre 97 additional State Pension                                                £ 35.32
Post 97 additional State Pension                                               £ 24.28
Graduated Retirement Benefit                                                   £  2.30

The amount each week is:                                                         £196.15

"It's Obvious That You Will Need To Supplement Your State Retirement Pension"

Maybe you can "survive" on £159.80 a week. Or the little bit better £196.15 a week.  But who wants to just survive?

It stands to reason that the Basic Retirement Pension is just not going to cut it. 

Yes, you may get a few add-ons (pension credits etc.) but it still will not be enough to live a meaningful life.

If, you are lucky enough to be part of a company pension scheme then we are both happy for you and envious.

But there's an awful lot of our country folk who do not have either a company pension or a private pension.  Take a look at the headlines below:

15 MILLION WORKERS DON’T PAY INTO A PENSION

And the one below:

MILLIONS FAIL TO SAVE FOR OLD AGE

Shock survey reveals nine out of ten not saving enough for social care

You MUST supplement your State Retirement Pension with a private pension.  Often referred to as a Personal Pension or an Individual Pension.

There are three types, although they are all esentially the same. These are:

1. Stakeholder Pensions - popular with employers as a cost effective way of providing a pension for their workers

2. Group Personal Pensions - set up by employers as a means to keep costs down with the employer making contributions as well

3. Self Invested Personal Pensions or SIPPs - this is the ype of Personal Pension that we advocate.  Why?  Because you are in complete control of how your money is invested.

Conclusion

Your State Retirement Pension is a nice little bonus for you working your whole life.

It's a modest sum but there again, not an insignifcant one. 

Depending on your age, will depend whether you have a Basic State Pension or a New State Pension.  They're about the same.  With the difference being that you will not receive the latter type until you are past 65 years young (the old retirement age).

There is a little-known way of increasing your State Retirement Pension.  And that is to defer payment.  Prior to reaching your retirement age, the Department of Work and Pensions will write to you with information about your retirement.

In this communique they will state what your retirement benefit will be and it is your prerogative to defer payment of your pension if you choose to do so.  And indeed, can afford to do so.

However, most people will want to take their pension when it is due.  Nobody knows how long they will live.

But it is paramount that you set up an Individual Pension Plan in addition to your State Pension.  It is only common sense to do so.

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