Why you can’t rely on the State Pension for a happy ever after

man carrying bike up a forrest path - reliance on the state pension


MoneyPlus Features Team

6th January 2016 at 3:35pm

So much has been written about the State Pension lately that it’s hard to keep up.


Type ‘State Pension’ into Google and there’s a mountain of information to wade through, making it hard to separate facts from speculation.

One minute we hear there’s a new, £155.65 flat rate State Pension on the way; then we discover that flat rate is actually something of a myth, at least for now. As Pensions Minister Baroness Altmann admitted in a Radio 4 interview in autumn 2015, the whole idea of the flat rate has been “mis-sold” to the public and is “not something everyone will get at the beginning”.

How much State Pension will you get?

The reality is that when the new flat rate comes in from April 2016 you could get more, less, or the full £155.65 depending on the National Insurance contributions you’ve made by the time you reach your State Pension age.

If you’re already in receipt of the State Pension by then you’ll continue to get what you receive under the existing basic State Pension and any earning-related top-ups – you won’t end up getting less.

It used to be so simple. Women retired at 60 and men at 65 when they picked up their relatively meagre State Pension. Now it’s a case of trying to figure what will you get and when – and for some women it’s a real bone of contention.

A petition started by Women Against State Pension Inequality condemning ‘unfair’ State Pension age increases for women born in the 1950s has just reached the 100,000 signatures needed for it to be debated in parliament.

On the plus side, the fact that it has been increased over a number of years has done much to reduce pensioner poverty.

That’s good news but the reality is that only two OECD (Organisation for Economic Co-operation and Development) countries pay poorer State Pensions than the UK – Mexico and Chile. Countries such as Turkey, Russia and Greece pay significantly bigger State retirement incomes, according to its Pensions at a Glance 2015 report.

Although, it has be said the report is not a like-for-like comparison and doesn’t take account of benefit top-ups which would make things more balanced.

Sitting back and hoping that the State Pension will be enough to take care of you in your later years is unlikely to end in the kind of happy ever after you’ve dreamed about. But it certainly helps you plan your overall retirement income, so that you get an idea of what you need to save elsewhere.

What can you do about it?

The State Pension rules change on 6 April 2016 and getting informed will go some way to clearing up the confusion. Find out how to get a statement on how much you may be due here.

Calculate when you’ll reach State Pension age using the State Pension calculator. Or try our pension calculator to see if your pension savings are on track, including your private savings and State Pension.

Read more on this in ‘The new State Pension: Why many people won’t get what they expect’.

History of the State Pension: Then and now

  • 1908: State Pension for those reaching age 70
    The first non-contributory pension State Pension in the UK was the Old Age Pension with around 500,000 people aged 70 or more receiving five shillings or 25p a week from 1 January 1909. It was paid in full to those with a yearly income of £21 or less, reducing to zero for those who earned £31 a year. Married men received more. It cost the Exchequer £7m a year
  • Only one in four people reached the age of 70 and they were likely, on average, to live another 9 years
  • Life expectancy for those born now is currently 79.1 years for boys and 82.8 years for girls – but this could change
  • In 2012-2014, a man in the UK aged 65 had an average of 18.4 years of life remaining and a woman had, on average, a further 20.9 years to live
  • The planned rise in the State Pension age increases to 68 in 2036 – again this could change.

Join the conversation and follow us on twitter @StandardLifeUK and Facebook.

The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in January 2015.