For readers in a rush:
- The state pension alone sometimes isn’t enough to cover living expenses in later life
- Most people will need a workplace or personal pension to help them fund the retirement lifestyle they want
- You can boost your pension savings through workplace and personal pensions
If you’ve just started thinking about your later life savings, you might have the state pension in mind.
Whilst the state pension is often seen as a bit of a safety net for retirees, relying on it alone might not give you the comfortable retirement many savers aspire to have.
So what can you do instead?
What is the state pension?
The state pension is a government-funded payment meant to help with living costs after age 66. The state pension age is set to rise to 67 between 2026 and 2028. To be at least partly eligible, you would generally need to have at least 10 qualifying years of National Insurance contributions or credits.
You can ‘earn’ your qualifying years through employment, self-employment, or voluntary National Insurance payments. You may also be able to earn them if you’re a carer or you receive certain benefits.
To qualify for the full new state pension amount (which can change from year to year), you typically need 35 qualifying years. But the exact amount you’ll receive is based on your individual circumstances.
How much is the state pension in the UK?
In the 2024/2025 tax year, the new state pension is set to rise to £221.20 per week for the full amount, up from £203.85 per week. Qualifying pensioners will get an additional £902 per year, bringing their yearly total to around £11,500. Those on the basic state pension who started receiving their payments before 2016 will instead get an additional £692 per year. Some people might find that this is enough to cover their basic needs. But many people will need more than this. Especially if they don’t qualify for the full amount of state pension, or face unexpected costs or want more than a basic standard of living.
You may be able to get more from the state pension if you defer taking it at the eligible age.
People are living longer than ever before, which means they could require their pension pot to last for much longer, and may even need it to pay for long term care. The state pension can help to boost income, but relying on it solely in later life might not work for everyone.
How to boost your pension savings
If you were planning on relying on the state pension to fund your later years, you might find these tips helpful.
Think of the state pension as a ‘top up’ each month
Instead of using the state pension as your sole source of income in later life, you could think of this as additional income to what is provided by your workplace or personal pension. This will help to make sure you’re not relying on the state pension alone.
Pay as much as you can into your workplace pension
When you contribute to your workplace pension, you benefit in a few different ways. The first is that the government provides tax relief on your contributions. This means that for each amount you contribute, the government tops it up based on your income tax bracket. So, for basic rate taxpayers, the government adds £25 for every £100 you pay in. In the 2024/25 tax year most people will be able to get this relief – and you can also claim additional tax relief from HMRC if you are taxed at the higher rate(s) - up to 100% of your salary, but capped at a maximum of £60,000.
The second benefit is that most workplaces have to make contributions of at least 3% of your qualifying earnings to your pension while you put in 5% - this is a requirement of an auto-enrolment scheme. Better still, many workplaces might increase their contributions the more you pay in, or even match your contributions up to a certain amount. So, say you put in 5% of your salary into your pension, your employer may also put in 5%, meaning 10% of your salary would go into your pension. Check with your HR or rewards department where your workplace pension is held and what your pension benefits are
Save into your pension as early as possible
Saving into your pension as early as possible can boost your pension savings in later life. This is because of something called compounding. This is where you can make money not only on the money you invest, but also on the growth you've already made, and will continue to make (thanks to leaving your pension invested for longer).
Save into more than one pension
If you have a workplace pension, or even multiple workplace pensions (from each job you’ve had), this doesn’t mean you can’t have a personal pension as well. Nor does it mean you need to pick your own investments and be your own fund manager. It’s just an account you’ve set up for your retirement.
What is the point of a personal pension?
A personal pension is like a long-term savings plan. It aims to give you money to support yourself when you’re not working anymore, or in your later years. By putting money into a pension throughout your life, you’ll build yourself a financial cushion for later.
How you spend your pension money is up to you. Most people find in the first few years after retirement it gives them the freedom to explore things they couldn’t before. You can check out our retirement planner which lets you work out what income you might need.
And for many people, a pension will be used to support increased living costs and long-term healthcare during later years.
The cost of care in the UK depends on where you live. But costs can go up if you need residential care and nursing care.
The other thing to keep in mind is that women tend to live longer than men, meaning they will need their pension pot to last a few more years.
Saving into a personal pension can have a lot of benefits. Unlike your workplace pension, you’ll be able to choose which provider you want to hold your pension with.
How do personal pensions and SIPPs work?
There’s often very little difference between a personal pension and a Self Invested Personal Pension, known as a SIPP. They can both give you access to funds, so, when you invest your money, you’re pooling it together with other investors. The funds can be either actively managed, or passive funds tracking different indices like the FTSE. And if something isn’t performing the way it should, the fund managers may make adjustments.
With some SIPPs though, you can can choose to invest in a wider range of assets, bonds, shares or even commercial property. It can offer you greater flexibility and control since you can access a wider range of assets and funds, but it can be a little more time consuming. You’d need to be comfortable making the decisions of where to invest your money, through different funds or stocks. It can be more cost-effective when it comes to fees and charges, but this is often because you’re having to do most of the leg work.
If you’re getting a little lost by the lingo, you can top-up your investment knowledge here.
So, how does a personal pension work?
- How much can I put into a personal pension or a SIPP? In the 2024/25 tax year, you can save up to £60,000, or 100% of your taxable earnings, whichever is lower, into your pension each year and get tax relief on it.
- Can you get tax relief on contributions? Yes, you can receive tax relief, based on the rate you pay tax, on contributions up to the annual allowance.
- How does pension tax relief work? The tax relief you receive depends on your individual circumstances (your income and your tax bracket), but you will automatically receive 25% relief on what you pay in up to the £60,000 annual allowance, or 100% of your earnings, whichever is lower . If you are a higher earner, you should get additional tax relief from HMRC which you’ll need to claim back in your tax return.
- What if I’m a much higher earner? If you earn an income above £200,000 before tax, and your income including pension contributions (adjusted income) is above £260,000, your annual allowance will reduce by £1 for every £2 over the threshold. So the annual allowance could go down to £10,000. Tapering rules can be really complicated. It’s best to take impartial advice if this applies to you.
- Can unused annual allowance be carried forward? Yes, you can carry forward unused annual allowance. If you haven’t used your full annual allowance for the previous three years, you can carry it forward to the current tax year.
So what now?
You can calculate your state pension age Link opens in a new window to find out the earliest age you can start receiving the state pension.
Also check your national insurance record Link opens in a new window to see whether you qualify for the full state pension amount. That way, you’ll get an idea of how much you might need to top up any personal pension with.
If you’ve taken a career break, through ill health, childcare, or caring for a loved one, you can top up your national insurance to help you reach the full qualifying years. You can voluntarily fill any gaps in your record with contributions up to the last six years.
Check in with your employer to see whether they can match your contributions to a higher amount. Or if they offer any other pension benefits and rewards.
Look into whether or not a personal pension would be right for you. You don’t need to save masses each month, but anything can help. Your future you will thank you.
Where to next?
- Want to brush up on more of your pension knowledge? Check out our other Helpful Guides.
- Need to find and combine your old pensions? Use our handy tool.
- Want to find out more about your retirement options? Try our retirement planner.