Payment of Pensions

Once you reach retirement (or the date at which payments start if this is different) your pension will be described as being ‘in payment’. From this point, you will receive regular payments of your pension in one of several ways.

Direct Payment

The way in which your pension is paid will depend on the individual arrangement you have with your pension provider. The majority of individuals will receive the State Pension, and so it is useful to look at the payment process for this first. Normally the state pension is paid directly into a bank or building society account, using a method known as Direct Payment. This system replaced the previous norm whereby pensioners would receive cash from a Post Office counter. The government says Direct Payment is a more secure method of pension payment.

There are some restrictions on the type of account that can be used to receive Direct Payments. The government suggests that a regular bank or building society account should be used, as they allow instant access to your cash as well as the use of debit cards and chequebooks. Furthermore, some bank and building society accounts continue to allow users to withdraw money over the counter at a Post Office; few banks still offer this service, however, so you will need to shop around.

Alternatively, it is possible to open a dedicated Post Office card account. These were designed to cater for those who do not or cannot have a bank or building society account, and can only be used to receive the state pension and other benefits or tax credits. Finally, you also have the option to open a National Savings Easy Access account, which acts exactly like a savings account from a high street bank. An account of this type can be used to receive any kind of Direct Payment.

Opening a high street bank account should be an easy process, although you should remember that you will generally need two forms of identification. Opening a Post Office Card account, however, can be more complex. In order to apply you must have a letter of invitation, which can only be acquired from the Department for Work and Pensions.

Payment Frequency

The frequency with which your state pension is paid will, to a certain extent, be left up to your judgement. When you reach retirement age and the payments that you are forecasted to receive are over £5, you will be offered the choice between having your pension paid on a weekly basis, every four weeks, or every 13 weeks. If you will receive payments of £5 or less, however, these will be paid on an accumulated annual basis.

If you also receive a personal or occupational pension, the way in which this is paid will depend on your particular provider. These types of pension tend to be paid at the end of each banking month, and you will almost certainly receive remittance advice with your first payment. This will also show any tax that has been deducted via PAYE. For more information on the way in which a personal or occupational pension will be paid, you should contact your provider.

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