What is the state pension amount in the UK?
The full rate of the new State Pension in the UK is £185.15 a week and it came into effect on 6 April 2016. The UK state pension is funded from National Insurance (NI) contributions, paid by employees and employers. Individuals are usually required to have a minimum of 10 years of contributions to qualify for any state pension. These don't have to be 10 years in a row. This means that for a decade, you will have either:
Worked and paid NI contributions
Received NI credits, such as when you were ill, unemployed, or a parent or carer
Or paid voluntary NI contributions.
If you've worked or lived overseas you may also be entitled to receive some of the new State Pension, or if you've paid married women's or widow's reduced rate contributions. You'll need 35 qualifying years to receive the full new State Pension.
How are UK pension amounts calculated?
To determine the amount of pension you can receive, your National Insurance contributions before 6 April 2016 are used to calculate a starting amount. This will be whichever of the following is higher.
How much you would receive under the old State Pension rules, including basic state pension and additional state pension.
How much you would get if the new State Pension had been introduced at the beginning of your working life.
This starting amount would include a reduction if you were contracted out of the additional state pension because you were in a particular stakeholder, workplace, or personal pension. If your starting amount is less than the full new State Pension, you can add more qualifying years to your NI record after 6 April 2016. You can continue to do this until you reach the new State Pension amount or State Pension age, whichever happens first.
Each qualifying year on your NI record after 5 April 2016 will give you an additional £5.29 a week. You can determine the exact amount you'll receive with a few simple calculations. Divide £185.15 by 35 and multiply this by the number of qualifying years after 6 April 2016.
If you didn't make any NI contributions or receive NI credits before 6 April 2016, your State Pension is calculated under the new State Pension rules. This means you'll typically need at least 10 qualifying years on your National Insurance record to get any State Pension or 35 years to receive the full new State Pension.
UK annual increases and deferring your State Pension
The new State Pension rises each year by whichever of the following is the highest:
Prices (percentage growth in UK prices)
Earnings (average percentage growth in wages).
You can check the government website to determine how much State Pension you're entitled to or request a paper statement.
If your retirement is several years away, there are ways you can boost your retirement savings. For instance, you don't actually have to draw on your UK state pension straight away. If you can delay taking it, you will get more once you do eventually begin claiming it. For every nine weeks you delay claiming your pension and defer it instead, your State Pension benefits will increase by 1%.
EU pensions compared to the UK
So, how does the State Pension in the UK compare to other state pensions in Europe?
State pension in France
Everyone must pay into a pension fund in France that's funded by both employee and employer contributions. A maximum of 50% of the average annual earnings can be drawn from this state pension at retirement, up to €39,732 a year. Workers are also required to pay into supplementary pensions.
The pension system in France comprises two parts. Both are set up by the state and contributing to them is compulsory. This means you don't have the option to choose any type of supplementary scheme. You can't choose to opt out of this either. The scheme is based on your profession.
Régime de Base: The basic French state pension is calculated by the number of yearly quarters you worked and how much you paid in social security contributions.
Régime Complémentaire: This complementary pension scheme operates on a points system that varies depending on your salary and the job you had.
contributors can start claiming their pension from the age of 62 as long as they have worked for at least 42 years before claiming the full state pension. However, the French authorities actively encourage people to continue working for longer by offering a pension increase for each quarter of a year worked beyond retirement age. Anyone born after 1 January 1955 cannot claim a full state pension until they've turned 67. To receive any pension in France, you need to have worked for 10 years or more.
State pension in Germany
Germany's federal government introduced its new basic pension scheme in January 2021 to ensure that anyone who has paid state pension contributions in Germany for a substantial amount of time receives adequate pension benefits. Germany has three types of pensions. However, many retirees in Germany typically rely on the relatively generous statutory German pension. The three types of pension schemes in Germany are the following.
Private pensions: Individual pension investments set up through insurance providers or banks to increase a person's total pension entitlement for when they reach pension age.
Company or occupational pensions known as betriebliche Altersvorsorge (bAV): Private voluntary pension schemes provided by employers that workers can use to boost their German pension contributions.
Mandatory state pension or Public Retirement Insurance or gesetzliche Rentenversicherung (GRV): The state pension in Germany is compulsory and paid by employees through social security contributions deducted automatically from their pay, and contributions from employers. The contribution rate is around 18.6% based on annual net earnings. As the employer and employee share contributions, this means it's around 9.3% each.
There are no minimum or maximum amounts that an individual must pay into their state pension in Germany. However, how long they've worked, their age and general income will determine their overall pension rate. The upper limit on how much a person could contribute to their pension in 2019 was €6,700 in former West Germany and €6,150 in former East Germany.
To qualify for a German state pension, you need to have worked for at least five years in the country. The size of your pension pot will depend on the size of contributions you've paid into the pot during your residency in Germany.
The official pension age in Germany is 65 years for both men and women. This is expected to increase to 67 by 2029. If you have contributed for more than 33 years, you can opt to claim early retirement. However, the number of months you would have otherwise had to work until pension age will be deducted from your pension entitlement. Employees earning an average wage in Germany can expect to receive 50% of their employment income after they retire.
State Pension in Spain
The average state pension in Spain is €900 a month and is the main source of income for many Spanish retirees. Spain’s pension system is divided into three “pillars”.
Spanish state pension: Available to all residents working in Spain and funded through compulsory contributions (also covers survivors pensions).
Company and employee pensions: Conditions and availability of the pension scheme are decided by the employer.
Private pensions: Voluntary pension schemes that offer more flexibility than the state pension in terms of when you can withdraw savings.
Under the Spanish state pension system, people can claim a contributory pension based on their employment and social security contributions or a non-contributory pension that offers basic entitlements to anyone who doesn’t qualify for other types of pension, including people with disabilities and low-income households. While the Spanish government spends in the region of 11.4% of its GDP on pensions – well above the global average of 8.2% – the government is aiming to reduce reliance on the state pension by encouraging more take-up in the second and third pillars of the country’s pension system.
Pre-tax rates for the full pension in Spain are more than 81% of the gross annual salary, the highest rate in Europe. Pensions are funded by contributions from both employees (4.7% of salary) and employers (23.6% of a worker’s salary). Self-employed people must pay all of their contributions.
The current retirement age in Spain is 65 years and 10 months. However, it’s possible to retire earlier than this if you have paid at least 37 years’ worth of social security contributions.
State Pension in Denmark
Denmark's state pension or folkepension consists of a basic amount and a pension supplement. The supplement depends on whether a person is single or part of a couple. The basic flat rate may also be reduced if a retiree’s employment income exceeds a certain threshold.
In addition, the pension supplement is means-tested and considers income from all other sources aside from a pension. The total amount of state pension, including pension supplement, is DKK13,853 per month, equivalent to around £395 per week for a single pensioner or DKK10,225 per month, which is around £295 per week for per person in a couple.
To qualify for the full basic state pension, retirees must have been a resident of Denmark for at least 40 years, from at least 15 up until the state pension age. Denmark's current state pension age is 65, but this is set to gradually increase and will be 67 by 2027. As they don’t receive it automatically, Danish retirees must claim it, which they can do if they are within six months of state pension age.
To receive the state pension in Denmark, you need to be a Danish citizen or meet at least one of the following criteria:
You are a refugee and have been granted a residence permit
You have lived in Denmark for more than 10 years and worked for at least five years before receiving your pension
You are a citizen of an EU or EEA country, UK or Switzerland, and have at least three years of earned state pension entitlement from one of these countries, with one year of this being in Denmark.
Non-EU pensions compared to the UK
State pension in the US
The US state pension, often referred to as Social Security, is divided into several categories:
Old-Age Insurance: Retirement pension
Old-Age Survivors Insurance: Widow's and orphan's pension
Old-Age Survivors Disability Insurance: Disability pension
Supplemental Security Income: Welfare program providing assistance to seniors that are disabled, blind, or on an extremely low income
Temporary Assistance for Needy Families: Services for low-income families with young children.
Social Security is only available to US citizens and is largely financed through Social Security taxes paid by both employees and employers. According to data from the OECD, US pensioners typically receive 49% of their working wage at retirement. As in other parts of the world, the US state retirement age is increasing. Those retirees born before 1960 can receive their retirement benefits from 65 years old. Everyone born after 1960 must wait until they are 67.
However, some retirement plans do offer older people the chance to receive their Social Security benefits from 62. But if they do, they will see a reduction in pension benefits of up to 6% for each year they retire early. If they choose to wait until they are at least 70 to retire, they will also get an additional 5% to 6% for each extra year of contributions.
The precise amount US pensioners receive will typically depend on the age they are when they retire, the state they live in, and the amount of savings, investments, and workplace pension contributions they have made. However, from May 2019, the average monthly state benefit in the US for retired workers was $1,412 (equivalent to around £1,100).
State pension in Australia
Australia’s version of the state pension is its Age Pension, which is means-tested and funded by tax revenues. The average Australian worker will receive 43% of their salary as retirement income. The maximum basic pension with allowances for a single pensioner in Australia is AUS $987.60 per fortnight ($25,678 a year) or $1,488.80 per fortnight ($38,709 a year) for a couple.
It’s possible to start claiming the state pension in Australia from the age of 65 and six months, however, this age is expected to increase to 67 by 2023. Alongside the state pension in Australia, employers are also required to make contributions of 9.5% of an employee’s gross earnings into a retirement fund under what’s called a “superannuation guarantee”.
To qualify for the state pension in Australia, you must be:
An Australian resident, having lived in the country for more than 10 years
Aged at least 66 and 6 months, depending on when you were born
Able to meet the required asset and income tests.
Depending on your assets and income, you may qualify for either full or part of the Australian Age Pension.
Assets test: As a single person, to qualify for a full Age Pension in Australia, your assets will need to be valued under $270,500 if you are a homeowner, or $487,000 if you aren’t. You may still qualify for a part Age Pension if your assets are valued at less than $599,750 if you’re a homeowner or $816,250 if you aren’t a homeowner. As a couple, your combined assets need to be under $405,000 if you own your home or $621,500 if you don’t. You may still qualify for part of the Age Pension if your assets are valued at less than $901,500 as a homeowner, or $1,118,000 if you don’t own your home.
Income test: To be eligible for a full Age Pension, your income must come in under $180 a fortnight ($4,680 a year) if you are a single person. However, if your income is under $2,155.20 a fortnight ($56,035 a year) you may still qualify for a partial Age Pension. Alternatively, if you are part of a couple, your income will need to be under $320 a fortnight, or $8,320 a year, to be eligible to receive the full Age Pension. Meanwhile, if your combined income is under $3,297.60 a fortnight, or $85,738 a year, you may qualify for a partial Age Pension.
People that are eligible to receive the Australian Age Pension, may also qualify for other benefits, including:
Pensioner Concession Card