Approaching retirement

Updated on 10 September 2018

When you retire, your income and where it comes from will probably change. This means that the tax you pay and how you pay it might change too.

You might not stop work completely when you reach retirement, but the period around the state pension age is still a major change in your life. It is a time when things can go wrong with your tax affairs; you may also have to make some important decisions.

When do I reach state pension age?

The state pension age for women is gradually increasing from 60 to 65, from 6 April 2010 to 6 November 2018. This affects women born between 6 April 1950 and 5 December 1953.

The state pension age for both men and women born after 5 December 1953 will gradually increase from 65 to 68.

To work out your state pension age, you can use the state pension calculator on the GOV.UK website.

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What do I need to consider when I approach state pension age?

When you reach your state pension age, you are normally entitled to claim your state pension. You might also, for example:

  • stop work,
  • change to working part time,
  • start to receive a regular pension from a previous employer,
  • take money out of your pensions as lump sums or as a regular income.

When these changes happen, you should try to understand how they affect your tax and what you need to do.

You can continue to work after you reach your state pension age as a “forced” retirement age no longer exists. There are, however, some circumstances when you can be made to retire. There is more information on the GOV.UK website.

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What should I do as I approach state pension age?

There are a number of steps you can take as you approach your pension age to help you plan for your future. 

You might need to:

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Can I increase my state pension entitlement?

Your state pension is based on your National Insurance record when you reach your state pension age. The number of qualifying years you need depends upon when you reach pension age.

You can check your pension age on the GOV.UK website.   

The state pension changed for people who reach state pension age on or after 6 April 2016. This is men born on or after 6 April 1951 and women born on or after 6 April 1953. The intention was to make the rules simpler and enable people to plan for their future by ensuring they know how much state pension they will receive.

The number of years you need to have paid or been credited with National Insurance contributions in order to qualify for a full state pension changed with the move from basic state pension to the new state pension as follows:

  • 30 years if you reach state pension age on or after 6 April 2010 but before 6 April 2016, or
  • 35 years if you reach state pension age on or after 6 April 2016.

You will usually need at least 10 qualifying years of National Insurance contributions or credits to qualify for any state pension.

You can check how much state pension you could get, when you can get it and how to increase it, if you can. Details of how to do this can be found on the GOV.UK website.   

It may be possible to pay voluntary National Insurance contributions if there are gaps in your record to increase your pension entitlement and you wish to do that. You should note that there are time limits for doing so. Voluntary contributions may be either Class 2, if they are for a period when you have been self-employed but not earning enough to have to pay those contributions or Class 3 in other cases. For more information on Class 3 contributions see the GOV.UK website. Before making any payment of voluntary contributions you should check with the Future Pension Centre that it is in your best interests to do so and that payment will increase your pension entitlement.

For help and advice on whether there are ways to increase your state pension you should contact the Future Pension Centre. Full contact details can be found on GOV.UK. You may also want to get independent financial advice.

Currently, the full new state pension is £164.35 per week, but if you were an employee who paid National Insurance contributions at the contracted-out rate this could affect the amount of state pension you will receive in the future. See the news article 'New State Pension – Did you pay contracted-out NIC?' on our website for more information.

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Where can I find more information?

Government information on tax and National Insurance for pensioners, can be found on the GOV.UK website.

For practical information on the state pension, including the state pension age calculator and obtaining a forecast, go to the GOV.UK website.

For Government information on pension choices, go to the Pension Wise website. We also help you understand tax on taking money out of your pension in our further guide.

For Government information on planning your retirement income go to the GOV.UK website.

There is Government information on planning for retirement on the Your Pension website.

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