Do you pay National Insurance on a pension?

No, you do not pay National Insurance on your pension. This includes the state pension, personal pension, workplace pension or annuity.

You only pay National Insurance contributions on income earned through employment or self-employment until you reach state pension age.

Once you reach State Pension age – you stop paying National Insurance even if you continue to work. The exception being if you're self-employed and pay Class 4 contributions. You stop paying Class 4 contributions at the end of the tax year in which you reach State Pension age.

What tax do I pay on a pension?

Pensions are subject to income tax only.

All of your state pension is subject to income tax rules.

A private or personal pension, such as a workplace pension you’ve built up during employment, has a tax-free amount of 25%. The remaining 75% is subject to income tax rules.

Effectively, think of pension payments like salary payments. You get a personal allowance every tax year (currently £12,570). Any pension payments that exceed this will have income tax applied. Apart from any tax-free portion you’re taking.

Do you pay national insurance on a pension if you retire early?

By current pension rules, you can access a private pension from age 55. So, if you choose to retire earlier than the state pension age, you will be able to take payments from a private pension without paying National Insurance on those payments.

Summary

Pensions are not subject to National Insurance. Your salary is.