The state retirement pension is the foundation of your pension when you retire. Paying into this pension is compulsory there is no opt out but you can pay into other pensions as well.
You pay National Insurance Contributions on your earnings between the lower and upper earnings limits, your employer deducts these contributions from your salary and pays them over to the Inland Revenue together with the employers contribution. If you are self-employed, you pay National Insurance Contributions yourself. These contributions build up your rights to the basic retirement pension, often called the 'old-age pension'.
You can get this pension when you reach state pension age. At the moment this is 65 for men and 60 for women. But the state pension age for women is going to change from 60 to 65. This change will start to happen from 2010 and by 2020 the state pension age will be 65 for both men and women.
Currently the state pension is linked to Inflation and therefore will increase in line with the cost of goods and services. This means, however, that as people's earnings rise generally faster than inflation, people relying on the State Pension will become relatively poorer. Both Labour and Conservative parties have confirmed that their intention is not to link pensions to national average earnings.
