State Pension Benefits

Understanding State Pension Benefits

• The State Pension is a regular payment from the UK government to individuals who have reached State Pension age.
• It is based on the National Insurance contributions individuals have made, or have been credited, during their working lives.
• The State Pension is an example of a defined benefit scheme as it guarantees specific income upon retirement.
• The State Pension age is changing; previously it was 60 for women and 65 for men, but it is gradually increasing for both.

Types of State Pension

• There are two types: the basic State Pension and the new State Pension. The type you get depends on when you reached State Pension age.
• The basic State Pension is for those who reached State Pension age before April 2016. The most you can get from this is £137.60 per week.
• The new State Pension is for those reaching State Pension age after April 2016. The full new State Pension is £179.60 per week.

Claiming State Pension

• The State Pension doesn’t start automatically when one reaches State Pension age. It needs to be claimed.
• Individuals can claim their State Pension online, over the phone or by post.

Role of State Pension in Retirement Planning

• As part of a retirement plan, State Pension provides a stable, regular income once someone reaches State Pension age.
• For many people, the State Pension forms a core part of their retirement income, around which they build their other retirement savings.
• An understanding of the State Pension benefits is critical in informed financial planning for retirement.

State Pension and Financial Risk

• State Pension mitigates some financial risk in retirement by ensuring a guaranteed source of income.
• However, the State Pension alone may not be sufficient to maintain desired lifestyle post retirement, hence many rely on personal and workplace pensions as additional sources of income.