Retirement pension planning: When can I retire in the UK and is new state pension increasing in 2020?

GOT your sights set on retiring on a sunny beach? You may need to wait longer than you had hoped.

When you can claim your pension depends on your age and the type of pension.

You can retire at any age you want, but the age at which you can access money you've saved into your pension is fixed.

Under the current law, the age at which you can get the state pension is 66 and it's been this age for both men and women since October 2020.

Previously it was 65 and it has also been different ages for men and women in the past.

It is due to increase to 67 between 2026 and 2028 and then to 68 between 2044 and 2046.

The Government wants to speed up the move to 68 bringing this forward to between 2037 and 2039 but this has not become law.

So here is your definitive guide to when you will reach retirement and what you need to know.

When can I claim the state pension in the UK?

You can claim the new state pension if you're a man born on or after April 6 1951 or a woman born on or after April 6 1953.

The exact age you'll be is worked out based on your date of birth.

To calculate the exact date that you will access the money, you can use the state pension calculator.

If you were born before these dates, you're covered by a different scheme called the basic state pension, which this article doesn't cover.

How much is the state pension?

Currently, the full new state pension is £179.60 a week.

But the actual amount you will receive depends on your national insurance record.

To get the full state pension amount you must have at least 35 years' of national insurance contributions, and you need to have at least 10 years' worth of national insurance contributions to get anything at all.

You can use a Government tool to find out how many years of contributionms you have and how much state pension you're likely to get.

But former pensions minister Steve Webb revealed in June 2019 that a Government blunder has seen more than 360,000 people receive an incorrect state pension forecast.

Pensions minister Guy Opperman has reportedly admitted there is a "significant problem" after people were issued with online forecasts saying they will be getting a higher amount than they are actually entitled to.

The state pension rises each year from April 6, and increases in line with either growth in wages, growth in prices or by 2.5% – whichever of these is higher.

This is known as the triple lock guarantee.

The state pension increased by 2.5% in April 2021 using the triple lock formula, and rose by 3.9% in 2020 based on wage growth.

The triple lock could change because of coronavirus though, as it has skewed the figures which dictate the rise.

Wages could grow as much as 8% which would give pensioners a bumper pay boost of as much as £746 a year in April 2022 if the triple lock continues.

When is the state pension paid?

The state pension is usually paid every four weeks into an account of your choice.

You’re paid in arrears for the last four weeks, not the coming four weeks.

What are the different types of pension?

WE round-up the main types of pension and how they differ:

  • Personal pension or self-invested personal pension (Sipp) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
  • Workplace pension – The Government has made it so it's compulsory for employers to automatically enrol you in your workplace pension, unless you choose to opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions rose to 8% in April 2019, with employees now paying in 5% and employers contributing 3%. This is up from the 5% of contributions workers and companies were required to pay in previously, where employees contributed 3% and employers 2%.
  • Final salary pension – This is a also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year on retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore.
  • New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £175.20 a week and you'll need 35 years of national insurance contributions to get this. You also need at least ten years' worth of national insurance contributions to qualify.
  • Basic state pension – If you reached the state pension age on or before April 2016, you'll get the basic state pension. The full amount is £134.25 per week and you'll need 30 years of national insurance contributions to get this. If you have the basic state pension you may also get a top-up from what's known as the additional or second state pension. Those who have built up national insurance contributions under both the basic and new state pensions will get a combination of both schemes.

Why are some people not paid the full state pension?

Millions of pensioners have been left in "total confusion" thanks to a "contracting out" scheme which means they no longer qualify for a full state pension.

These people paid a lower rate of National Insurance while working, in exchange for a higher private pension.

This was more likely to happen if you worked in the public sector.

Contracting out ended in April 2016 but some pensioners are now claiming this happened without their knowledge – meaning they are unable to properly plan for the future.

To check if you were contracted out, check old payslips or speak to your employer at the time.

When can I claim my workplace pension?

With your personal and workplace pensions, the age you can access this depends on the scheme, but is usually from 55.

There are fresh plans from the government to increase this age to 57 from 2028.

You may be able to take money from your work pension before 55 if:

  • you are retiring due to illness
  • you had a right to under the scheme you joined before April 6, 2006
  • your company offers to help you get money out earlier. This could be in the form of an unauthorised payment, which is subject to 55 per cent tax
  • your life expectancy is under a year. See full conditions on the Government website.

What about auto-enrolment?

Currently, all employers must enrol staff aged between 22 and state pension age with earnings above £10,000 into a pension.

This is separate from the state pension though, and is known as a private or workplace pension.

Every worker fitting this description begins saving into the pension unless they opt out.

These rules were introduced in 2012 with the amount savers and employers have to put in rising up until now.

You must now pay in 5% of your salary into a pension while your employer pays in 3%.

Plans were revealed in 2017 to reduce the minimum age for pension auto-enrolment  to 18 by the mid 2020s in a move ministers say will affect about 900,000 young people.


Will 18-year-olds get a state pension too?

Brits currently in their 20s face having to work until they are 70 under a radical Government review of state pensions.

But whether the state pension will even exist by the time people reach retirement is another question entirely.

The UK’s pension liabilities were £7.6trillion at the end of 2015 (the latest figures available).

The figure, which is the total amount promised to pay for Britons’ future retirement income, includes £5.3trillion of pension entitlements that were the responsibility of central and local government, most of which – about £4trillion – came from state pension entitlements.

The remaining £2.3trillion were private sector employee pension entitlements with £2trillion due to final salary pensions, up from £1.4trillion in 2010.

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