UK state pension: how many years of National Insurance contributions do you need - when can I retire?

The age at which you can officially retire has become a hot topic of late both in the UK and abroad.

Chancellor of the Exchequer Jeremy Hunt sought to get workers who have retired early back into the UK workforce during his Spring Budget 2023. He announced he would scrap the lifetime allowance - a move that has been criticised for benefitting the wealthiest in society - while also increasing the annual tax-free savings allowance.

Rishi Sunak’s government had also been looking into hiking the state pension age to 68 well ahead of schedule - a decision the government has now pushed back to 2026 when the official age will climb to 67-years-old for people born after April 1960. President Emmanuel Macron has been attempting a pension age increase in France but the decision has led to massive strike action all over the country.

It all comes as governments around Europe seek to tackle the issues presented by ageing populations. Here in the UK, the three Conservative governments we have had over the past year have all looked at short-term ways to tackle the problem, with Rishi Sunak deciding to bring in the pensions triple lock in April 2023 after Liz Truss had cast the policy - a key Tory manifesto pledge - into doubt during her short premiership.

At the moment, to qualify for a full UK state pension you have to have made National Insurance contributions (NICs). This levy has itself been the subject of much change, with Kwasi Kwarteng reversing a rate hike in his infamous mini budget. Earlier in 2022, Rishi Sunak - who was then in charge of the Treasury under Boris Johnson - also raised the threshold above which you have to pay NICs.

But how many years of NICs do you have to make before you can qualify for a full UK state pension? Here’s what you need to know.

What is the UK State Pension?

The UK state pension is the financial support the government pays out to elderly people after they pass a particular age. It is different from your workplace pension, which is paid out to you when you leave or retire from a workplace and meet certain criteria (e.g. time served with the company, or the minimum age permitted by the pension fund).

At present, the full amount of pension you can get is £185.15 a week - or £9,627.80 a year. But from 1 April 2023, the rate will be upped to £203.85 (an extra £18.70 a week and an additional £972.40 over the year).

This increase of 10.1% has come about as a result of how the triple lock works. The government raises pensions by whichever of the following is the biggest:

• CPI inflation (as of the previous September)
• The average wage rise
• 2.5%

It meant that in the 2022/23 tax year, pensioners saw their state support rise by just 3.1% - well below the rates of inflation we have seen over the past 12 months. This April’s increase will only make up some of the ground pensions have lost, as prices are still rising even as the rate of inflation comes down.

What are National Insurance contributions?

The amount of state pension you can get depends on how much you have paid to the government in NICs over your lifetime. The government ringfences these contributions so that they go towards state handouts and benefits. You pay NICs when you are:

• Aged 16 or over
• An employee earning more than £184 a week
• A self-employed person making £6,515 in profit per year.

You can also make voluntary contributions to avoid having gaps in your National Insurance record - something that could help you to avoid deductions from the state pension you receive later in life.

How much you pay in NICs is dependent on your employment status, how much you earn and your personal circumstances. Your payments stop when you reach state pension age, which is set at 66-years-old until 2026 when it will rise to 67.

How many years of NICs are needed to get state pension?

To qualify for a state pension, you currently have to have worked for at least 10 years - although you do not have to have worked these years consecutively. You can also qualify if you have received National Insurance credits because you have been a carer for a loved one, received Jobseeker’s Allowance, or Employment and Support Allowance.

You have to have made at least 35 years of NICs to qualify for the full amount of pension. The rate you get is on a proportionate sliding scale between 10 years and 35 years. So, if you have 10 years of NICs, you’ll currently be given £52.90 a week in state support. If you have 30 years of contributions under your belt, you’ll receive £158.70 per week.

To work out how much you’ll get, divide the current full state pension amount (£185.15) by 35, and then multiply it by the number of years you have worked since 5 April 2016. Or you can see how much state pension you could get based on your circumstances, when you can receive it, and how you might be able to increase it, by visiting the government’s pension calculator.

For people who were making National Insurance contributions before 6 April 2016, your NICs record will be used to determine what is known as a ‘starting amount’. This figure is the higher of either of the following:

• The amount you’d receive under the old State Pension rules (which includes basic State Pension and Additional State Pension)
• The amount you would get if the new State Pension had been in place at the start of your working life.

You could even get an amount above the full state pension because of the way pensions were calculated under the old rules. To find out more about the old state pension rules, visit this section of the government website.

When can I retire?

You can your pension from the age of 66. However, if you have not pulled together enough years of NICs, you can decide to delay retirement.

The official age will gradually rise to 67 for people born after 5 April 1960 - a process that will begin in 2026. That year will also see the government that wins the next election review when the state pension age should climb to 68, with the change currently legislated to take place in 2044.

The current Rishi Sunak administration deliberated over whether to adjust the legal timetable for the rise to 68 so that the increase was brought forward to the late 2030s. Chancellor Jeremy Hunt was even reported to be seeking to bring the hike forward to 2035.

But the government has opted not to follow through with the proposals. When considering a rise to the official retirement age, the government considers whether the current average life expectancy will mean a typical worker will spend more than a third of their adult life as a pensioner. If the proportion climbs well above a third, it may opt to bring any retirement age increase forward.

Many workers with significant private pension pots - either through their employer or via funds they have accumulated themselves - may opt to retire earlier than the current official age. However, in a speech in March, Bank of England governor warned a rise in the number of early retirees has been contributing to the inflation crisis, as it is increasing demand for products at the same time as there are not enough workers across the economy to produce adequate supplies - a situation that’s feeding price hikes.