Do You Get the State Pension and a Work Pension?

Planning for a comfortable retirement essentially comes down to how much income you're going to be able to generate without income from your job. When it comes to retirement income, your pensions are going to play a huge part in this. One of the common questions that I get is can you get a State Pension and a work pension? The answer to that question is that yes, you can definitely get both a State Pension and a work pension.

Now, whilst you can have a State Pension and a work pension, you need to meet a number of conditions to ensure that you get the maximum amount possible for each of these two types of pension. In today's article, I'm going to explain what you need to do in order to ensure you get a full State Pension from the government, and also what you want to do in order to get a work pension as well. 

How to Get a Full State Pension

Over the years there have been many different types of State Pension from the government. And there’s been loads of different changes throughout the years. Today I'm going to be focusing only on the current, or what's known as the, New State Pension.

For people who aren't yet at State Pension age, this is the pension that you will be on when the time comes. The age you become eligible is currently increasing to 68 for those born after 1978, and it's happening on a sliding scale over the coming years.

The amount of State Pension that you're eligible for once you hit this age is based on the number of years that you've made National Insurance Contributions. Currently, in order to get a full State Pension, you need to have paid National Insurance Contributions, or have been exempt, for 35 years.

There's no specific level of contribution that you need to have made. It's based on the years that you made any contributions rather than the amount that you've actually paid. In practice, this means that people who are lower earners actually get better value for money, because contributions are based on a percentage of your wage during your working life.

If you haven't paid in for a full 35 years, you are able to pay extra National Insurance Contributions to make up the difference. It's definitely worth checking this out and you can do it via the HMRC website.

There are also certain cases when you're exempt from paying National Insurance Contributions or have exempt years that still count towards your National Insurance record. These include years where you are looking after children or if you're disabled and unable to work. Generally, these exemptions are tied to benefits such as Child Benefit or Disability Living Allowance. Because of this, it's important that you apply for these even if you are eligible. This is particularly the case for Child Benefit and earning over £50,000 a year.

A really important point to keep in mind, is that the State Pension isn’t means tested. This means that it doesn’t matter how much other income or assets you have, you can be eligible for a full State Pension when you hit the qualifying age.

How to Get a Workplace Pension 

Workplace pensions have become much more prevalent since the arrival of auto enrolment. There are two main types of workplace pensions that are common in the UK. Defined benefit or Final Salary schemes used to be the main type of pension that was available, but they're slowly becoming less and less common. 

This form of pension provides you with a guaranteed income stream similar to the State Pension and is based on the number of years you work for a company and your salary whilst you're working for them. These pensions are very, very valuable because they provide you with a guaranteed income and there's no need for you to take investment risk in order to reach your retirement income objectives. They're often indexed to inflation, and it just basically means you're taking a lot less risk throughout your retirement. The downside of these is that they are less flexible and you have less access to lump sums of cash from the scheme.

The second type of pension in the UK is what's known as a Defined Contribution scheme. These are essentially just pots of money which you and your employer contribute to, and invest for your long term retirement plan. The amount you have once you reach retirement is based on the level of contributions that have been made over your career, as well as the level of growth you've achieved, on your investments. 

This form of scheme is more flexible, it allows you to put in additional contributions and withdraw funds in different ways. It also requires you to take investment risk in order to achieve the best outcome for your portfolio.

Both of these types of pension scheme have one thing in common, and that is that the more that you contribute over your working life, the higher your benefits once you reach retirement. As the State Pension isn't means tested, it means that the amount you have in your pension scheme has no bearing on the amount you'll receive from the State Pension. 

With that in mind, it is important to keep in mind that both these pensions can be taxable, and that will have an impact on the net income you've got in retirement.