How does working part-time affect your pension?

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Fact Checked.
Updated on
November 29, 2022

In a nutshell

If you work part-time, you still have the same right to a workplace pension as someone who works full-time. As long as you’ve made National Insurance contributions, you should qualify for a State Pension too.

Nutty

Want to reduce your hours at work? You’re not alone! More and more of us are looking for a better work-life balance and the number of people working part-time has recently jumped to over 8 million in the UK (according to the Office of National Statistics)!

But how does working part-time affect your pension?

How does working part-time affect your pension?

Well, you’ll be pleased to know that part-time workers are entitled to a workplace pension, just the same as full-time workers are. Oh, and as long as you meet certain criteria, you should still get a State Pension too. If that all sounds like gobbledygook then don’t worry! We’re here to break it all down for you.

How does working part-time affect your workplace pension?

A workplace pension scheme is a pension that your employer sets up for you. You contribute a percentage of your earnings each month (at least 5%), and your employer tops that up themselves (they have to add at least 3% from their own pocket). Kerching!

Workplace pension

The money that you and your employer add to your pension is meant to tide you over later on in life – at the moment, you’re allowed to take money from your pension when you turn 55, but it’s rising to 57 in 2028.

Working part-time doesn’t really affect your workplace pension all that much. If you’re a part-time employee, you’re still entitled to a workplace pension – just like a full-time employee.

The main difference is that you’ll probably be earning less than someone who’s working full-time. That means you won’t have as much money going into your pension each month, so you’ll probably have less to live on when you retire.

Part time workplace pension

Nuts About Money tip: to help save for your future, open a personal pension. You'll get a 25% bonus every time you save. Our recommend provider is PensionBee¹.

How do I get a workplace pension as a part-time worker?

Wondering how to access this wonderful thing called a workplace pension as a part-time worker? Well, if you earn more than a certain amount each year (currently £10,000), the chances are your employer will have to automatically create a pension for you, called ‘auto-enrollment.’  So you won’t have to do anything at all!

You’ll get auto-enrolled if you’re all of these things:

  • Working in the UK
  • 22 years old or over 
  • Under State Pension age (we’ll explain what this is later, but the age is currently 66)

Do you earn less than £10,000 per year? Don’t worry, you may still be able to get a workplace pension. 

Although your employer won’t have to automatically enrol you into a pension scheme, you can still ask them to set one up for you if you earn at least £6,240 per year. And the really good news is that they can’t say no! In fact, they’ll still have to make contributions for you out of their own pocket, just the same as if you were auto-enrolled. So, make sure you ask them to arrange one for you if this applies to you!

How does working part-time affect your State Pension?

The State Pension is a weekly payment you can get from the government when you reach a certain age, known as State Pension age. Hooray! State Pension age is currently 66, but it’s slowly getting higher and higher (for people born in April 1960 or after, it’ll be 67 and then it’s going to gradually climb to 68).

At the moment, the full State Pension is £185.15 a week. It may not sound like much, but the good thing is that you can get it on top of your workplace pension (and on top of your personal pension if you have one, which is a pension you can set up yourself). So it’s a nice extra!

Part-time state pension

Anyway, what you really want to know is whether your State Pension will be affected by working part-time. The answer? Not directly!

That’s right, you can get the State Pension whether you’re working full-time or part-time. However, in order to qualify for it, you have to make National Insurance contributions over your working life (National Insurance is a payment you make to the government alongside your taxes, to cover things like healthcare). 

If you earn very little (which is more likely if you work part-time), you may not need to pay National Insurance. That might sound great, but not paying National Insurance can mean not qualifying for the State Pension. Urgh! Which brings us onto…

How do National Insurance contributions affect the State Pension?

If you’re going to qualify for the State Pension, you’ll need to make National Insurance contributions over your working life. You need to pay National Insurance for at least 10 years to get anything at all. But to get the full State Pension (that £185.15 per week we were telling you about), you need to pay it for at least 35 years.

If you earn more than £184 per week (or you make a profit of at least £6,515 a year if you’re self-employed) you have to make National Insurance contributions. So, you should be well-placed to get that nice weekly payment. Awesome!

If you earn more than £120 per week (but less than £184), you don’t have to make National Insurance contributions. But guess what? Your contributions will be marked as paid on your record so that you can still qualify for the State Pension – even more awesome!

However, if you earn less than £120 per week, things can get tricky for you. You don’t have to pay National Insurance. And sadly, if you don’t, nobody’s going to mark it as paid for you. That could very easily mean no State Pension for you later on in life.

But there is some good news! You can avoid this from happening by making voluntary National Insurance contributions (paying National Insurance even though you don’t have to). Although paying something voluntarily might not sound like your idea of fun, at least it will mean you can qualify for that State Pension. Just think of it as buying security for later on in life – your older self will thank you for it!

How a personal pension can help if you’re working part-time

You’re probably tired of us banging on about how you’ll have less to live off when you retire if you’re working part-time. But it’s true! If you’re working fewer hours, that means you’ll be earning less and likely squirrelling less away into that pension.

Yes, the State Pension can help to top up your income when you reach State Pension age. But in reality, this will only give you a small payment each week, which won’t be enough for most people to live off.

So, why are we going on about this? Contrary to what you might think, we’re not just doing it to rub it in or depress you. Promise! Instead, we want to make sure you know how important it is to start saving for retirement now, so you don’t get caught out in the future.

Luckily, it’s really easy to do that, using something called a personal pension.

A personal pension scheme is one that you set up and pay into yourself. It’s basically a special savings account that you can only access when you reach State Pension age – except better, as you won’t have to pay tax on the earnings you pay into it!

Even better than that, the money you put into your personal pension will get invested (used to buy investments like stocks and shares, which are essentially ownership stakes in companies). The idea is that your investments should increase in value over time so that you have more money to live off when you retire. Pass the champagne!

By setting up a personal pension, you can top up the income you get from your workplace pension and your State Pension. That way, you’ll have enough money to be able to live a nice life when you get older (cruise anyone?!).

How to set up a personal pension

To get a personal pension, you just have to choose a pension provider (those are the companies that give out pensions). Each pension provider will have their own pension plans, which are basically schemes where they lay out how much they’ll charge you and where they’ll put your money (in other words, what kind of investments they’ll make on your behalf). You just need to pick the one that sounds best for you.

Don’t worry, we know that that involves a lot of research, which can be pretty time-consuming. So, to save you time, we’ve done the hard work for you and have picked out our 3 favourite personal pension providers. 

These providers all make it super easy to set up a pension and see where your money is going with handy apps and fantastic customer service. We’ve also written reviews about each one to tell you a bit more about why we like them so much – so, have a read if you see a provider below that you like the sound of!

Best personal pensions

Find the best personal pension for you – you could be £1,000s better off.

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Best overall

PensionBee

PensionBee are leading the way with modernising pensions. The investment options are great for many pension savers, it’s an awesome app and website, which are both easy to use, and have tools and charts to show you how your money is growing – and importantly, how to hit your retirement goals.

It's easy to set up and get going, you can start a brand new pension, or simply transfer your existing pensions across.

You’ll pay one simple fee that decreases the more you save.

Fees: low (0.5% to 0.75%) for their core plans

Rating

PensionBee rated 5 stars

Our friends at PensionBee are giving our readers a £50 pension contribution when they sign up with Nuts About Money too, just use the button below to get started.

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Simple and easy

Penfold

Originally built for the self-employed – for you! Penfold is a great app to get you going, with simple pension fund options to choose from and awesome features on the app to view your money at any time. Plus simple tables and charts to work out how much you should be investing to hit your retirement goals.

You don’t need an existing pension to use it, but if you do have one, or a few, you can move those overs too.

Fees: low (0.75% or 0.88%)

Rating

Penfold rated 5 stars

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Best overall

Moneyfarm

Moneyfarm is like a financial advisor on your phone (or website), their experts will work with you to determine the best investment strategy. It’s low cost, with an excellent investment track record and great customer service.

You’ll pay one simple fee that decreases the more you save.

Rating

Moneyfarm rated 5 stars

Want to do things a bit more old-school?

As far as we’re concerned, there’s nothing negative about apps and websites that make setting up and managing your pension super easy. In fact, we love them!

However, we get that not everyone’s comfortable doing things this way. So, if that sounds familiar, you can also just speak to a financial advisor. 

Financial advisors are professionals who can help you set up a personal pension, either in-person or over the phone. Just be aware that they can be expensive as they add their own fees on top and don’t always pick the cheapest pension funds!

To find a local financial advisor, you can use Unbiased¹.

Just want to speak to someone? You can get free guidance from the Pensions and Advisory service (MoneyHelper), a Government organisation set up to help with your pension. Learn more here.

Let’s recap

If you work part-time, you’ll be treated exactly the same as someone who works full-time when it comes to pensions. Hooray! The only real difference is that you’ll probably be earning less than someone who works full-time, which means your workplace pension will be smaller. If you earn less than £120 per week, it will also mean you need to make voluntary National Insurance contributions if you want to qualify for the State Pension.

Just bear in mind that even with a workplace pension and a State Pension combined, you might not have enough to live on when you’re older. So, we’d always recommend setting up a personal pension to help top them up. Not only do you not have to pay tax on the earnings you pay into a personal pension, but your money will also get invested so that hopefully, by the time you retire, it will have increased in value.

If that sounds great to you, check out our reviews for PensionBee, Penfold and Nutmeg – our favourite pension providers. Their handy apps and excellent customer service make saving for retirement easy and stress-free. Enjoy!

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Best personal pensions

Find the best personal pension for you – you could be £1,000s better off.

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This article was written by the team at Nuts About Money, and fact-checked by 2 independent reviewers. You’re in safe hands.

Best personal pensions

Find the best personal pension for you – you could be £1,000s better off.

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