Understanding pensions

The State Pension is a regular payment paid by the government. You can check when you will reach State Pension age by calling the Future Pensions Centre on 0800 731 0175, or using textphone 0800 731 0176.

A new State Pension has been introduced for people who reach State Pension age after 6 April 2016. The amount you can get depends on how many years you have paid National Insurance for. Visit GOV.UK for more information.

A private pension (or personal pension) can be arranged by you or your employer. Some of your pay is automatically put into the scheme each payday. Your employer also usually pays in.

There are two types of private pension. If you have a defined contribution scheme, the money you pay in is invested and hopefully grows over time. If you have a defined benefit scheme, you get a tax-free lump sum when you retire and a regular income for the rest of your life. The amount of money you get is based on either your final salary or your average salary during your employment.

Cancer and pensions

It can be worth thinking about your pension options when you have cancer.

There are lots of reasons why you may want to think about pensions. These are some examples:

  • You may be able to access your pension early, or in a different way.
  • If you need to stop working for a while because of cancer, you may want to know how it would affect your pension.
  • It can be helpful to find out how your loved ones could benefit from your pension if you die.


State Pension

The State Pension is a regular payment you can get from the government when you reach a certain age.

The age you can get the State Pension depends on when you were born. It is different for men and women:

  • The State Pension age for men is currently 65.
  • The State Pension age for women has been slowly rising and will reach 65 in 2018.

The State Pension age for men and women is slowly increasing in stages. It will reach:

  • 66 by October 2020
  • 67 between 2026 and 2028
  • 68 between 2037 and 2039.

The State Pension age is reviewed regularly, which means it may change again in the future.

You can check when you will reach State Pension age on GOV.UK. Or you can call the Future Pension Centre on 0800 731 0175 or use textphone 0800 731 0176 (Monday to Friday, 8am to 6pm).


The new State Pension

A new State Pension has been introduced for people who reach State Pension age after 6 April 2016. Anyone who reached the State Pension age before this date is not affected by these changes.

You need to have paid National Insurance for at least 10 years to get any State Pension. This does not need to have been 10 years in a row.

National Insurance is a tax you pay while you are working. If you are unable to work, you may be treated as if you have paid the tax by getting National Insurance credits. To get the full rate of the new State Pension, you need to have paid National Insurance (or have got National Insurance credits) for at least 35 years.

The full new State Pension pays up to £164.35 a week. The amount you can get depends on how many years you have paid National Insurance for. If you would have been entitled to more under the old State Pension, you may get an additional amount. This is called a protected payment.

If your spouse or civil partner has died, you may be able to inherit extra payments or part of their Additional State Pension. This depends on their National Insurance record, age and when they died.

You do not have to claim the new State Pension as soon as you reach State Pension age. By choosing to claim later, you could get more money when you do claim. You should find out more about your options before you make a decision.


Basic State Pension (old rules)

If you reached State Pension age before 6 April 2016, there are two parts to the State Pension:

To get the full basic State Pension, you need to have paid National Insurance (or have got National Insurance credits) for at least 30 years. If you have paid less National Insurance than this, you may still be able to get some State Pension, but the amount will be lower.

The highest amount of basic State Pension you can get is £125.95 a week. Depending on how much National Insurance you have paid, you may be able to get more. This is known as Additional State Pension.

If your spouse or civil partner has died, you may be able to inherit their basic State Pension, or get credits to increase your own pension. This depends on their National Insurance record, age and when they died.


Further support

If you have a low income, you may be able to get extra support as well as your State Pension. This is called Pension Credit.

Pension Credit is a means-tested benefit. Means-tested means you can get extra support if your income or savings, or both, are below a certain level. The level depends on your situation. You may get more support if you are a carer or have a disability. 

You may also be able to get help towards other costs, such as housing council tax and travel. You can call the Macmillan Support Line on 0808 808 00 00 for more information. We have financial specialists who can help you deal with your money worries.

We have more information about Pension Credit and other benefits you may be able to get.


Private pensions

Private pensions, also called personal pensions, can be arranged by either:

  • your employer – these are called workplace pensions
  • you.

If you have a workplace pension, a percentage of your pay is automatically put into the pension scheme every payday.

In most cases, your employer also pays into a workplace pension, alongside the money you pay in. Employers should have arranged workplace pensions for most of their workers by February 2018. This is called auto-enrolment. You can choose to opt out.

If you do not have access to a workplace pension, you may want to arrange a pension yourself. You should think about getting help from a financial adviser when doing this.

Usually, you get tax relief on money paid into private pensions. This adds to your savings. Some workplace schemes may not give tax relief if you do not pay tax, or if you earn under £11,850 per year.

Types of private pension

There are two types of private pension:

  • Any pension you arrange yourself is a defined contribution scheme.
  • Workplace pensions can be either a defined contribution scheme or defined benefit scheme.

Defined contribution scheme

This is where you build up an amount of money. If your employer has arranged the pension, they pay money in alongside your contributions.

The money is usually invested in stocks and shares, along with other investments. It hopefully grows over time. Remember the value of investments can go up or down. You should try to review your investments regularly to make sure you get the best deal. If you need help with deciding how to invest your contributions, the Money Advice Service has more information on pension investment options.

The rules about defined contribution schemes became more flexible in April 2015. Usually you can take your pension from the age of 55. When you can access your savings depends on the rules of your pension scheme.

Defined benefit scheme

This is where your employer promises to pay you an agreed amount when you retire. The amount you get is based on how long you have worked there and on one of the following things:

  • Your final salary.
  • Your average salary from across your time at the workplace.

These are also called final salary schemes or career average revalued earnings (CARE) schemes.

You may have a defined benefit scheme if you:

  • have worked for a big organisation for a long time
  • work in the public sector.

They are generally a good option, but are now rarely offered to new workers outside of the public sector.

If you have a defined benefit scheme, you get a tax-free lump sum when you retire and a regular income for life. These schemes usually have a retirement age of 65. Some schemes may allow payment from the age of 55. But this may reduce the amount of money you get. This is known as an actuarial reduction.

Back to Pensions

Accessing your pension

There are different ways of accessing your pension. This depends on the type of pension you have and your illness.

Pensions advice and guidance

You can get free guidance from our financial guidance team, The Pensions Advisory Service, Citizens Advice and Pension Wise, or you can pay for a financial adviser.