New findings from Standard Life’s Retirement Voice report reveal that a significant number of UK adults remain unclear about their state pension entitlements. Half of the adults surveyed do not know how much they are set to receive when they retire.
This lack of knowledge about pension amounts and eligibility criteria is concerning for experts who warn that state pension payments alone are insufficient to sustain a comfortable retirement.
The State Pension Payment and Eligibility Confusion
Awareness of State Pension Amounts and Eligibility
- 32% of respondents were unaware of the age at which they will qualify for their state pension, with a notable portion (12%) of those aged 55-64, who are approaching retirement, being among the unaware.
- Over half of the individuals surveyed (51%) do not know the current value of state pension payments. Furthermore, 52% of respondents are unsure how to calculate their pension entitlement.
- 34% of those polled did not know that their National Insurance (NI) contributions directly determine the pension amount they will receive, and that 35 years of contributions are required for full entitlement.
State Pension Payment Rate Increase
As of April, the state pension payment for the 2025-26 tax year has increased to £11,973 annually.
This is a step toward bringing it closer to the personal savings allowance, but it still remains below what many retirees will need to live comfortably.
Tax Implications and the Impact of Fiscal Drag
Tax analysts caution that older Britons may see a larger portion of their pension payments taxed by HM Revenue and Customs (HMRC) if current trends continue.
This is due to fiscal drag, which occurs when income or inflation rises while tax allowances remain frozen.
With personal allowances set at £12,570 until 2028, it is likely that retirees will begin paying taxes on their state pensions by 2026 or 2027.
Ensuring Correct State Pension Payments
Errors and Missed Contributions
Around 750,000 people are currently not receiving the correct state pension amount due to errors in National Insurance records or failures by the Department for Work and Pensions (DWP) to adjust for changed circumstances. Key areas where errors may occur include:
- Women who took time off work to raise children should ensure they received NI credits for those periods.
- Women whose husbands retired on or after 17 March 2008 need to verify their pension has been adjusted correctly.
- Over-80s individuals receiving a low pension should check that the DWP has properly assessed them for the over-80s rate.
- Universal Credit recipients must confirm they are receiving NI credits, which is vital for ensuring they receive the correct pension amount.
The State Pension: A Basic Foundation for Retirement
According to Dean Butler, Managing Director at Standard Life, the state pension remains an important aspect of many people’s retirement income but should not be relied upon as the sole source of funds.
The Pensions and Lifetime Savings Association notes that the state pension only covers a basic lifestyle, and does not provide enough to meet the minimum standard of living in retirement.
While the state pension serves as a foundation for retirement income, it is crucial for individuals to plan for additional sources of retirement savings.
Without proper understanding of how much they will receive, the age they will qualify, and the potential tax implications, many retirees may find themselves financially unprepared.
FAQs
What is the current state pension payment for the 2025-26 tax year?
The state pension for the 2025-26 tax year has increased to £11,973 annually.
How many years of National Insurance contributions are needed for a full state pension?
You need 35 years of National Insurance contributions to qualify for the full state pension amount.
How can I ensure that I’m receiving the correct state pension amount?
Check your National Insurance records and verify your eligibility for NI credits, especially if you have raised children, are over 80, or have been a Universal Credit recipient.