Will I pay income tax on my pension?

All the separate parts that make up your State Retirement
Pension are taxable. Basic, additional and graduated pension are all treated as income, as are any increases for adult dependants and the invalidity addition. So you can’t ignore your pension when working out if you have to pay income tax.  For more information on income tax see our Check Your Tax section.

What happens if I'm still earning?

You can draw your State Retirement Pension when you reach
pension age even if you are still earning. Your earnings will not affect the amount of pension you receive. But your pension will be counted as part of your taxable income. You might choose to put off claiming State Pension for a while to get either extra State Pension or a one-off taxable lump sum payment when you do claim. (See the section Can I defer my pension? for more details.)

If you carry on working after reaching pension age, you don’t
have to pay NI contributions. Give your employer a certificate
of age exemption form which you can get from your local
benefits office; although you no longer have to pay NI
contributions, your employer still has to. If your employer
deducts NI contributions by mistake, ask for a refund.

Will my pension affect my other benefits?

Claiming State Retirement Pension can affect your entitlement to some state benefits. State Retirement Pension is one of a group of benefits paid to replace earnings. You won’t normally be paid more than one of these benefits at a time. So if you get State Retirement Pension you will not be paid contribution-based Jobseeker’s Allowance, Incapacity Benefit, Employment and Support Allowance, Severe Disablement Allowance, Carer’s Allowance or Bereavement Allowance.

However, if you are entitled to another of these benefits which
is payable at a higher rate than your State Retirement Pension, you will get extra money to top up your pension. You can get advice on this by contacting your local Citizens Advice Bureau or from SeniorLine on 0808 800 6565 (0808 808 7575 in Northern Ireland).

If you are getting short-term Incapacity Benefit when you
reach pension age, you can go on getting a special short-term
rate of this benefit for up to a year of incapacity. This applies only if your incapacity began before you reached state retirement age. If you are in this situation you can choose to stay on Incapacity Benefit for a year or you can claim your State Retirement Pension. The amounts will often be the same but you may want to get expert advice on which option would be best for you. The long-term rate of Incapacity Benefit is not paid to people who are over state retirement age.

Employment and Support Allowance (ESA) is a new benefit, introduced in October 2008 to replace Incapacity Benefit.
However, this will initially only affect new claimants. Anyone
claiming Incapacity Benefit at the time ESA was introduced
will not be transferred onto the new scheme until April 2010. ESA is not paid to people over state pension age. If, before you reach state pension of more than £85 a week, this will affect the amount of ESA you recieve.

Carer's Allowance

You can claim Carer’s Allowance after retirement age. But
you can’t usually receive State Retirement Pension and Carer’s Allowance at the same time. If you get a reduced pension which is less than the rate of Carer’s Allowance you will get some Carer’s Allowance to top up your pension.

But even if you will not be paid any of your Carer’s Allowance,
it can still be worth putting in a claim to prove that you are
entitled to it. This is because means-tested benefits, such as
Pension Credit, Council Tax Benefit and Housing Benefit, have more generous rules for carers. So if you’re claiming these benefits and become eligible for Carer’s Allowance, you will get extra money. If you’re not claiming these benefits already, you may find that, as a carer, you become entitled to it. For more information about Carer’s Allowance, and to find out whether it is worthwhile applying for it, ask for guidance from SeniorLine on 0808 800 6565 (0808 808 7575 in Northern Ireland).