The UK State Pension is a regular payment made by the government to people who have reached the State Pension age. It is an important source of income for many retired people in the UK. With the cost of living rising, and inflation high, the amount received from the State Pension can have a big impact on pensioners’ standard of living. So how much is the full State Pension in the UK currently worth per month? Let’s take a look at the details.
The New State Pension
The State Pension system in the UK underwent major changes in April 2016. This saw the introduction of the ‘new State Pension’ which applies to anyone who reached State Pension age from 6 April 2016 onwards.
The full new State Pension is currently worth £185.15 per week. This equates to £803.85 per calendar month and £9,627.80 per year (before tax).
So in simple terms, if you qualify for the full new State Pension now, you will receive just over £800 per month or just under £10,000 per year.
The Old State Pension
The old State Pension still applies to those who reached State Pension age before 6 April 2016. This is made up of two elements:
– The basic State Pension – currently worth up to £141.85 per week or £615.40 per month.
– The additional State Pension (such as SERPS or S2P) – this depends on your National Insurance contribution record and could be worth up to around £185 per week or £800 per month.
So someone on the old system who has a full National Insurance record and qualifies for the maximum additional State Pension would receive around £326.85 per week or £1,415.40 per month under the old rules.
This is considerably higher than the new State Pension. However, over time as people migrate to the new system, the differences between the old and new pensions will reduce.
State Pension Age
To receive any State Pension you need to have reached your State Pension age. For men this was traditionally 65, but it has been rising for women ever since reforms in 2010. From November 2018 the State Pension age became 65 for both men and women.
It is continuing to rise though, up to age 66 by October 2020 and eventually reaching 67 by 2028. So you need to factor in your State Pension age when checking your entitlement.
There are proposals to increase the pension age further, to 68 between 2037 and 2039. However this is not yet law.
Qualifying for the Full State Pension
To get the full amount of State Pension, you need to have a minimum number of qualifying years on your National Insurance record.
For the new State Pension you need 35 qualifying years.
For the old basic State Pension it is 30 qualifying years. And to get the maximum additional State Pension you needed around 45 qualifying years.
If you have fewer than the required number of qualifying years, your State Pension will be reduced accordingly. But you may be able to boost your record by making voluntary NI contributions.
Certain benefits, caring roles and credits can also help boost your State Pension entitlement.
Tax and the State Pension
The State Pension is taxable. This means if your total income including your State Pension is above your personal tax allowance, you will need to pay income tax on your State Pension.
The standard personal allowance is currently £12,570 per year. So if your total income exceeds this, some of your State Pension will be liable for tax.
You may pay 20%, 40% or 45% tax depending on your total income level and specific circumstances. Paying tax on your State Pension does not affect the amount you receive initially, but you will pay tax on your overall income through self-assessment.
Some pensioners are eligible for the higher personal allowance, which can reduce tax liability.
Increases to the State Pension
The State Pension increases each year in line with the Triple Lock. This means it rises by the highest of:
– Earnings growth
– Inflation (CPI measure)
– 2.5%
This ensures pensioners’ income keeps pace with the cost of living. In April 2022, the State Pension increased by 3.1% due to the Triple Lock, representing CPI inflation. The Triple Lock was temporarily suspended for the 2022/23 year, but has been reinstated from April 2023.
Over time, Triple Lock increases will mean the State Pension becomes more generous. By the end of the 2020s it is forecast to exceed £10,000 a year and by 2060 could top £15,000 a year.
Purchasing Power of the State Pension
While the Triple Lock has increased the State Pension’s value, inflation and the cost of living crisis have eroded its real terms purchasing power recently.
For example, calculations suggest the basic State Pension has decreased in real terms by around £3,000 in purchasing power over the past decade when accounting for inflation. And the real terms value could fall further if inflation remains high.
This demonstrates why the Triple Lock and regular increases are important to maintain the State Pension’s buying power. But pensioners are still feeling the squeeze from rising prices.
State Pension Forecasts
You can check your personal State Pension forecast to see how much you are in line to receive when you reach State Pension age.
You’ll need to account for any shortfall in your National Insurance record, and whether you qualify for the old or new State Pension.
Getting a forecast from the government can help you plan, and see if you need to take steps to boost your entitlement.
Deferring the State Pension
There is an option to defer taking your State Pension when you reach State Pension age. Doing this will actually increase the amount you receive when you do start claiming.
Your State Pension will increase by 1% for every 5 weeks you defer, an equivalent of 10.4% per year. Deferred increments can add substantial amounts to your State Pension income when you decide to take it.
This is a useful option if you are still working full or part-time after State Pension age and don’t need the income yet. Deferring your pension can boost your income when you are ready to fully retire.
Conclusion
In summary, the current value of the full new State Pension is just over £800 per month or just under £10,000 per year. The old basic State Pension is £615 per month plus any additional pension. To receive this full amount you need at least 10 years of National Insurance contributions.
The State Pension increases each year with the Triple Lock system. But inflation is currently eroding its real terms value. Checking your personal State Pension forecast can help you estimate your income and plan your retirement finances effectively.
Frequently Asked Questions
Can you live comfortably on the new State Pension?
The full new State Pension provides an income of just over £800 per month. This puts it above the absolute minimum income standards. However, it may still be a squeeze to live comfortably depending on your circumstances. Additional income, savings or downsizing may be needed to cover extra costs in retirement.
Who qualifies for the full State Pension?
To qualify for the full new State Pension you need at least 35 years worth of National Insurance contributions or credits. For the full basic old State Pension you need 30 qualifying years. To maximize additional pension under the old rules requires around 45 years of contributions.
What age do you get the State Pension?
The State Pension age is currently 66 for both men and women. It is rising to 67 by 2028 and expected to increase further to 68 in the late 2030s. You can check your own State Pension age to confirm when you can start receiving it.
Can I boost my State Pension?
If you have gaps in your National Insurance record, you may be able to increase your State Pension by making voluntary contributions. Credits and rules on combining records with a spouse may also boost your entitlement.
Deferring taking your pension can increase it through delayed retirement increments. And working beyond State Pension age can improve your additional pension under the old system.
How much is the State Pension likely to be in future?
The full new State Pension should exceed £10,000 a year by the end of the 2020s through Triple Lock increases. By 2060 it is forecast to top £15,000 a year. However, no government can make binding commitments on State Pension rates decades in advance.
International Comparisons
It can be useful to look at how the UK State Pension compares internationally. Here is a comparison of State Pension income in different countries.
| Country | Annual State Pension |
|---|---|
| United Kingdom | £9,627 |
| Ireland | €13,135 |
| France | €10,608 |
| Germany | €16,752 |
| Spain | €12,946 |
| Italy | €8,317 |
| Poland | p35,061 |
| Australia | A$24,868 |
| Canada | C$18,615 |
| United States | $18,984 |
This shows the UK State Pension is lower than some comparable European countries like France and Germany. But it is higher than others like Italy and Poland.
Globally, the UK State Pension is lower than in Australia or Canada but higher than the average pension in the United States.
Of course, State Pensions are only part of retirement income. Many people also rely on workplace or private pensions, savings and other assets.
State Pension Amounts Over Time
The State Pension increases each year under the Triple Lock system. Here is how the new State Pension amount has changed over recent years:
| Tax Year | Full New State Pension |
|---|---|
| 2016/17 | £155.65 |
| 2017/18 | £159.55 |
| 2018/19 | £164.35 |
| 2019/20 | £168.60 |
| 2020/21 | £175.20 |
| 2021/22 | £179.60 |
| 2022/23 | £185.15 |
And here is how the old basic State Pension has changed:
| Tax Year | Full Old Basic State Pension |
|---|---|
| 2016/17 | £119.30 |
| 2017/18 | £122.30 |
| 2018/19 | £125.95 |
| 2019/20 | £129.20 |
| 2020/21 | £134.25 |
| 2021/22 | £137.60 |
| 2022/23 | £141.85 |
This shows how both State Pensions have increased each year, with the basic old pension always remaining lower than the new flat-rate pension.
Cost of the State Pension
The State Pension costs the government over £110 billion per year in payments. This represents around 5% of GDP and is one of the largest areas of expenditure.
The table below shows the breakdown of spending on different pensioner benefits:
| Benefit | Government Spend |
|---|---|
| State Pension | £101 billion |
| Pension Credit | £5.4 billion |
| Winter Fuel Payment | £2 billion |
| Other pensioner benefits | £2 billion |
| Total | £110 billion |
As the population ages, and more people claim a State Pension, the overall costs are projected to rise. But reforms to the State Pension age are hoped to limit the impact on taxpayers.
Future governments will face challenges balancing State Pension sustainability alongside ensuring dignity for older people.
Dependence on the State Pension
The State Pension forms a significant part of income for retired households. Of households where one member is above State Pension age:
– 35% rely on the State Pension for over half their income
– 19% are almost wholly dependent on it for over 90% of retirement income
– 45% would have income below the poverty line without the State Pension
Many pensioners are heavily reliant on their State Pension.Changes in State Pension policy and rates can have a big impact on their living standards.
| Dependency on State Pension | Percentage of Pensioner Households |
|---|---|
| Over 50% income from State Pension | 35% |
| Over 75% income from State Pension | 29% |
| Over 90% income from State Pension | 19% |
| Would be below poverty line without State Pension | 45% |
This dependence highlights why the Triple Lock and stability of State Pension rates is so important for many older people.
State Pension Reform Options
There is always debate around reforming the State Pension to ensure it remains affordable and provides secure retirement incomes. Here are some possible options:
Later State Pension Age
Increasing the State Pension age further could reduce the burden on taxpayers. But this would also force many people to work later into retirement.
Abolish Triple Lock
Removing the Triple Lock protection could save money but would break the government’s commitment and leave pensioners vulnerable to inflation.
Tiered State Pension
We could consider a tiered system where high earners and wealthy pensioners receive a smaller basic amount. This may improve targeting of State Pension resources.
Flat Rate Increase
Raising all pensions by a flat amount rather than a percentage each year may be an alternative to the Triple Lock that is simpler and sustainable.
Means-Tested
Means-testing the basic State Pension could direct more money to deprived pensioners but would take away the universality of the system.
There are no easy answers, but reform must balance the interests of both taxpayers and pensioners.
Conclusion
The full new State Pension is currently worth just over £800 per month for those reaching State Pension age from April 2016 onwards. This provides a baseline income to support retired people, with many pensioners heavily dependent on it. But rising inflation is eating away at the real value. The Triple Lock aims to maintain the State Pension’s buying power. With an ageing population, balancing financial sustainability against pensioner poverty will remain an ongoing challenge for government policy.