National Insurance need-to-knows to help secure maximum State Pension payments in retirement

Daily Record

15-05-2025

A new survey found over half of respondents admitted they had no idea of the current value of State Pension.
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New research from Standard Life's Retirement Voice report suggests there is a widespread lack of awareness around the State Pension, with many adults unsure of how much they will be paid and when they will start receiving it.
As the full new State Pension rises to almost £12,000 a year, half of UK adults (50%) are unaware of how much they will receive from their State Pension, including 31 per cent of those nearing retirement, aged 55-64. Meanwhile, nearly a third of UK adults (32%) and 12 per cent of 55 to 64-year-olds don't understand what the State Pension age means to them, or their future.
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Standard Life's research, conducted among 6,000 UK adults, found a substantial lack of understanding regarding other areas of the State Pension, including a lack of awareness that National Insurance Contributions determine the amount of State Pension someone receives in retirement.
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Over half of those surveyed admitted they had no idea of the current value of State Pension payments (51%) and were also unaware of how to calculate their State Pension entitlement (52%).
Meanwhile, over a third (34%) revealed they didn't know that their National Insurance contributions determine the level of entitlement and the amount of money they'll receive from the State in retirement.
Commenting on the findings, Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group, said: 'With the State Pension rising to £11,973 a year for the 2025/26 tax year, it remains a crucial part of many people's retirement income. But despite its importance, there's still a lot of confusion around how it works and how much people might get.
'Knowing when you'll start receiving your State Pension and how much you're likely to get is an important part of planning for retirement. It helps you work out how much extra you need to save, when you could afford to retire, and what your overall financial picture will look like.'
He added that understanding how your National Insurance contributions impact your retirement is vital, so you're not caught out when the time comes.
Mr Butler continued: 'With the Personal Allowance frozen at £12,570 until 2028, there's a good chance that people will pay tax on the State Pension alone from 2026 or 2027. The UK Government might change the rules to avoid this, but it's good to be aware of tax when planning for retirement.'
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Mr Butler answers key questions about the State Pension to help more people understand the retirement income.
What is the State Pension?
The State Pension is a regular payment made to you by the UK Government every four weeks when you reach State Pension age, which is currently 66. However, it's important to be aware that payments, which are issued by the DWP, can be made every week or every fortnight.
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Not everyone is entitled to the full State Pension, and the amount you receive might not be enough for you to live on. Therefore, it's important to factor your State Pension into your retirement planning and ensure you have a good idea of how much it might be worth, when you can claim it and how it will stack up with your other retirement savings.
The easiest way to check how much you will be due is to use the State Pension forecasting tool on GOV.UK here.
How much is the State Pension worth?
The full New State Pension is now worth £230.25 per week, however, the amount you get is dependent on how many 'qualifying' years of National Insurance payments you have. You'll usually need at least 10 qualifying years on your National Insurance record to get any State Pension and you'll need around 35 qualifying years to get the full New State Pension if you do not have a National Insurance record before April 6, 2016.
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What is my State Pension age?
Dean explains: 'Your earliest age you can start receiving State Pension is known as your State Pension age. You can find this out easily on the UK Government's website. Men born before 6 April 1951 and women born before 6 April 1953 can claim the basic state pension now, but if you were born on or after these dates, you'll be eligible for the New State Pension when you reach State Pension age.
'This age is regularly reviewed to account for factors such as affordability and life expectancy - it is currently 66 but will rise to 67 by 2028.'
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How does the State Pension Triple Lock work?
Dean explained: 'The purpose of the Triple Lock is to ensure that the State Pension doesn't lose value over time. It guarantees that, each year, the State Pension will rise by the highest of three measures: inflation in the September of the previous year (as measured by Consumer Prices Index); the average increase in total wages across the UK for May to June of the previous year; or 2.5%.'
Will the State Pension be enough to fund my retirement?
Dean said: 'The reality is there's a significant gap between what you get from the State Pension and what you may actually need or want in retirement.
'The State Pension only covers a very basic lifestyle - less than is needed for a minimum standard of living in retirement, according to the Pensions and Lifetime Savings Association - and, because it only starts in your late 60s, it won't help to support you if you want to retire earlier.
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'It should therefore only form part of your overall retirement plan and, so, it's important to fully understand how much you might need to save into your personal or workplace pension plan to potentially be able to afford the retirement you want. A pension calculator can help you see if you're on track.'
State Pension payments 2025/26
Full New State Pension
Weekly payment: £230.25
Four-weekly payment: £921
Annual amount: £11,973
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Full Basic State Pension
Weekly payment: £176.45
Four-weekly payment: £705.80
Annual amount: £9,175
Future State Pension increases
The Labour Government has pledged to honour the Triple Lock or the duration of its term and the latest predictions show the following projected annual increases:
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2025/26 - 4.1%, the forecast was 4%
2026/27 - 2.5%
2027/28 - 2.5%
2028/29 - 2.5%
2029/30 - 2.5%
State Pension and tax
The Personal Allowance will remain frozen at £12,570 over the 2025/26 financial year. The most important thing to be aware of is that people whose sole income is the State Pension will not pay income tax.
However, anyone with additional income on top of their State Pension may need to pay tax. This is paid a year in arrears, so if the 2025/26 financial year's uplift takes you over the threshold, you will not receive a tax bill from HM Revenue and Customs (HMRC) until July 2026.