Your retirement is a chance to relax and live the kind of lifestyle you’ve spent years working towards. And, to achieve the retirement you want, it’s important to save enough to afford your preferred level of comfort.
As a wise saver, your State Pension may form a relatively small portion of your retirement income.
Indeed, for the 2024/25 tax year, the full State Pension is worth £11,502.40. While this sum may be too small for you to fulfil your retirement dreams, it can provide a useful foundation and boost the money you have to spend each month.
The State Pension is set to rise 4.1% from 6 April 2025
The value of the State Pension is protected by the triple lock. Each year, the State Pension is increased by the highest of three measures:
- Average wage growth
- Inflation
- 2.5%.
In 2024, average wage growth beat the other two measures. And so, from 6 April 2025, the State Pension will increase by 4.1%, in line with earnings growth.
If you claim the full State Pension, this will see your payment rise by £470 a year to around £11,976.
However, the rules around how much you will receive, and any inflation-proofing, will depend on where you live.
Some British expats receive £4,900 less than retirees in the UK
As long as you’ve paid enough UK National Insurance contributions (NICs) to qualify, you’re entitled to take whatever State Pension you’ve accrued, no matter where you are living.
Typically, you need at least 10 qualifying years on your National Insurance record to receive any State Pension – though they needn’t be 10 consecutive years.
If you live in the EU, EEA, or Switzerland, your UK State Pension will increase in line with the rate paid in the UK – so, each April, you will see the amount you can claim rise in line with the triple lock rules, as outlined above.
If you live outside of these countries, while you can still claim your State Pension the amount you receive will remain constant. Due to the eroding effects of inflation, this means that the real value of your State Pension will effectively decrease over time.
In the event that you return to the UK after you've started claiming your pension, the amount you receive will increase to the current amount you’d be entitled to had you remained in the UK.
2 ways you could increase your State Pension
There are two valuable resources in life: time and money. You can deploy one or both of these to influence the amount of State Pension you receive.
1. Boost your State Pension by paying voluntary National Insurance contributions
You have a limited window of opportunity to significantly increase your State Pension entitlement through voluntary NICs.
If you are a man born after 5 April 1951 or a woman born after 5 April 1953, you have until 5 April 2025 to pay voluntary contributions to make up for gaps between tax years April 2006 and April 2016, if you are eligible.
After 5 April 2025, you will only be able to pay voluntary contributions for the past six years. So, the time to act is now.
Of course, if you’re a Brit living abroad, it’s important to account for the fact that you won’t necessarily gain the inflation increases, unless you returned to the UK.
Before you make a final decision, get in touch and we’ll help you understand the cost of the contributions you’d make versus the additional pension you’ll receive.
2. Increase your State Pension by delaying your claim
You can claim your State Pension when you reach the State Pension Age (SPA) – currently 66 for both men and women, though this will gradually increase.
However, just because you reach the required SPA, doesn’t mean you must start claiming your pension right away. In fact, it could pay to delay the time you start to claim your UK State Pension.
That’s because, for every nine weeks you defer making your claim, your pension will increase by 1%.
If you defer for a year, the amount you receive will increase by almost 5.8%.
You can defer your State Pension for as long as you want, though whether it’s a good idea to wait will depend on your individual circumstances.
If you have other sources of income, you may find that deferring is worthwhile. Plus, it’s also worth noting that, along with the deferral enhancement, you may also benefit from the increased amount the State Pension may be worth if you wait a year or two before claiming it.
That said, deferring your claim will mean missing out on annual income that will take some time to make up, even with the deferred increase. Depending on your circumstances, waiting to claim your State Pension may not be in your best interest.
You get to decide when to start claiming your State Pension
Don’t expect your State Pension to automatically kick in and start paying out when you reach your State Pension Age. You have to claim it – visit the government website to apply.
To make your claim abroad, you'll need to complete form IPC BR1, which you can download from the government website. You can complete and submit this form up to four months before you reach your SPA.
Alexander Peter can help you understand all your options
The UK State Pension can be complicated. Talk to one of our expert advisers to discuss your situation in detail. They will help you understand more about what the State Pension is worth to you and advise you on all your options.
Taking a holistic view of your finance and life circumstances, they will help establish the steps you should take to achieve the level of retirement income you're aiming for.
Get in touch
If you have any queries about your UK State Pension, or anything else to do with planning your retirement income, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
