Only 1 in 10 understand the State Pension – why relying on it can leave you short and how to plan

A new study suggests that many people in the UK still don’t understand how the state pension works even though the current system has been in place for 10 years. Research for AJ Bell found that only 1 in 10 people feel they have an “excellent” understanding of the state pension. Twice as many say their knowledge is “poor”. 

This lack of understanding matters, especially if you’re younger. The state pension age is already rising from 66 to 67 between now and 2028, and many people expect it to go even higher in the future. If you’re in your 20s, 30s or even 40s, you’ll likely end up waiting longer than previous generations to get it. 

Most people don’t know how much you need to qualify 

The research showed that only a quarter of people knew you need 35 years of National Insurance contributions to get the full new state pension. This is the amount you get if you’ve paid in, or received credits, for at least 35 qualifying years. 

Many people couldn’t even guess how much the state pension pays. Today, the full new state pension is worth around £12,000 a year, but only 15% correctly identified it’s worth between £12,000 to £13,000 a year. That’s not a lot to live on, and for many people, it won’t be enough on its own. 

Many aren’t sure what the state pension age actually is 

The survey also found huge confusion about when people can claim the state pension: 

• Only 19% correctly said the state pension age is 66 today. 

• 40% thought it had already risen to 67. 

• 12% thought it was still 65. 

This confusion is likely to grow. After the rise to 67 completes in 2028, the state pension age is planned to rise again to 68 between 2044 and 2046. The government could also decide to move faster, depending on the economy, life expectancy and public finances. 

You may not get the same system when you retire 

For younger people, the idea of getting a state pension feels distant. Many think the system will look very different by the time they reach retirement age and they may be right. The move from the “old” to the “new” state pension is still ongoing, and the rules around pension tax and contributions change all the time.  

But this doesn’t mean you should ignore it. In fact, understanding what the state pension can, and can’t, provide will help you plan better for your future. 

The state pension won’t give you a comfortable retirement 

The state pension provides a basic level of income. For most people, it’s not enough to fund the lifestyle they want in retirement, especially if housing, travel and everyday costs continue to rise. 

How much you actually need to retire comfortably  

According to the Retirement Living Standards developed by Pensions UK, you need at least £13,400 a year for a bare bones retirement as a single person in 2026. This is already above what the state pension (around £12,500) pays currently.  

However, this will only guarantee a bare bones retirement and assumes you own your home outright. On this sum, you won’t be able to keep a car, you’ll probably have around £55 a week for your food shop, and in terms of holiday and leisure, you’ll likely only be able to afford one week long staycation in the UK.  

For a comfortable retirement which includes a car, a holiday abroad, and a long weekend in the UK, plus more discretionary spending on entertainment, clothes, and footwear, you’d need around £31,700 a year as a single person.  

The situation is a little more doable if you’re a couple. A basic retirement will only “set you back” around £21,600 while a moderate retirement will cost you around £43,900. For people wanting more than just basic survival in their retirement, building their own pension is key.  

How to prepare for retirement today so you’re comfortable in your old age  

You’ve probably heard this about a million times now, but it’s only because it’s true. The best time to plant a tree was twenty years ago. The second best time is now. The same is true of pensions.  

It’s a hard one because in your 20s and 30s, you’re desperate to save for things you need right now, and not forty or so years down the line. Things like a housing deposit or a sinking fund for a car, or an emergency fund might all take precedence.  

But it’s so important to start on your pension as early as is possible for you, even if that means just contributing the bare minimum for now. You can always up contributions later, but the benefit of compound interest is right now, not ten years down the line - £100 now will be worth far more to you than £100 in a decade.  

Here’s why you should start as early as you can  

To give you an example, if you start contributing £100 per month to your pension pot when you’re 22 years old and contribute for 46 years (i.e. until you turn 68), assuming an average growth of 5% per year, you’d have around £200,000 when you retire. This assumes you only contribute £100 a month, and your contributions don’t go up as your salary does. Keep in mind, you get tax relief on contributions too.  

However, if you wait to start until you’re 32 and contribute the same amount for 36 years instead, you’d only have £115,000 in your pot in the end. That’s a difference of £85,000 if you start 10 years later.  

For context, 10 years of contributions at £100 per month would “cost” you £12,000 (not including tax relief and employer contributions). It’s a steep loss in pension pot earnings for what’s a relatively small outlay.  

Make sure you make the most of your workplace pension  

If you’re employed, your workplace pension is one of the easiest ways to save. Your employer pays in too, which boosts your pot. You also get tax relief on your contributions, meaning some of your pension savings come from money that would have gone to the government in tax.  

In the UK, the absolute minimum employer contributions are 3% of your salary. You need to contribute 5% of your salary. You also get tax relief. This is 20% if you’re a basic tax payer. So, for every £80 added to your pension, the government adds £20, meaning you get £100.  

That’s why it’s usually best to stay auto-enrolled in your workplace pension if you’re eligible. Not doing so is essentially leaving free money on the table.  

Check whether you can contribute more too. Some employers will match your contributions above the minimum required up to a certain amount, so if you’re able to contribute more than the minimum, it’s a good way to boost your pension.  

Make provisions if you’re self-employed  

If you’re self-employed, you’re three times less likely to have a pension than someone who’s employed. Many self-employed people aren’t aware they can open a private pension or that they’ll get tax relief on their contributions too.  

But something like a self-invested personal pension (SIPP) or private pension can be a great way to save for the future. This works very similarly to a workplace pension. You contribute a set amount and receive tax relief (usually automatically).  

Some people are put off by the idea of the pension being “self-invested”, but nowadays, there are so many legitimate providers, from your traditional banks to app-based platforms to choose from. Many come with low fees and have ready-made funds you can put your money in. This means, it’s a done for you pension based on your risk appetite (usually, you can pick from low, moderate, and high-risk options depending on your goals).  

A private pension is a great way to ensure you’re putting money away for the future, and not being in traditional employment shouldn’t put you off.  

Don’t rely on the state pension – start planning for your retirement today  

The state pension remains an important safety net, but it isn’t enough for most people to live on comfortably. With so many people unsure when they’ll get it or how much they’ll receive, it’s more important than ever to take charge of your own retirement savings. And with the state pension age rising, and likely to rise again, relying on the government alone is a risky plan.  

If you can, paying into a workplace or personal pension now can help make sure your future is more secure, whatever changes come to the state pension system.