Basic State Pension
The BSP is a flat-rate pension paid to anyone who has paid
enough
National Insurance Contributions or has enough credits when
they reach their State Pension Age (SPA).
If you reached your SPA on or after 6 April
2010
The full rate of BSP is payable if you have 30
qualifying years on your National Insurance record. If
you have less than 30, you will receive a proportionately lower BSP
(i.e. if you have 23 qualifying years, your BSP will be 23/30ths of
the full amount). You only need one qualifying year to get
some BSP.
If you reached your SPA before 6 April 2010
The full rate of BSP was payable if you had 39 (for women) or 44
(for men) qualifying years. The minimum BSP (25% of the full
amount) was payable if you had 10 (women) or 11 (men) qualifying
years.
Spouses and civil partners
Spouses and civil partners who have not paid sufficient
contributions may receive a pension based on their partners'
contributions. That pension could be 60% of their partners'
BSP.
Husbands' and civil partners' eligibility came into force on 6
April 2010.
State Pension Age
Click here to check your
State Pension Age (SPA).
Paying NI Contributions
If you are self-employed, you may have to pay
Class 2 National Insurance
Contributions (NICs) and, under certain circumstances, Class 4
NICs as well. It is the payment of these NICs that contribute
towards your BSP entitlement.
Class 2 NICs
You pay the flat-rate Class 2 NICs for every week
that you are self-employed. The current rate is £2.65
per week. It is paid by Direct Debit or by quarterly
bill.
It is possible to be exempt from paying Class 2
NICs (and therefore exempt from any state pension benefits
associated with paying Class 2 NICs) if your net profit is likely
to be less than the Small Earnings Exemption (SEE) limit. The
SEE limit is currently £5,595 per annum. This exemption
is not applied automatically. It must be claimed from HM
Revenue & Customs.
Class 4 NICs
You pay Class 4 NICs in addition to the Class 2
NICs if your trading profits exceed the lower profit limit.
The lower profit limit is currently £7,605 per annum).
You will also pay an extra 2% on any profits above the upper profit
limit. It is paid at the same time as your Income Tax.
Entitlement
Paying Class 2 NICs entitles you to most of the
state benefits that employed people paying Class 1 NICs are, i.e.
the BSP and bereavement benefits.
Full details can be found in our state
pension section. The main exception is that you will not
be entitled to Additional Pension benefits whilst you are
self-employed.
Additional Pension
The Additional Pension is paid in
addition to the BSP. Until April 2002, it was known as SERPS
and depended solely on the National Insurance contributions you
paid as an employee. From 6 April 2002, SERPS was reformed to
provide a more generous additional pension for low and moderate
earners, carers and people with a long-term illness or disability.
The reformed Additional Pension is known as the State Second Pension
(S2P).
The S2P is based upon earnings on which standard
rate Class 1 NI contributions are paid or treated as having been
paid. It provides a top-up to the basic state pension based
on actual or deemed earnings. All employees have to contribute
towards additional pension unless they make alternative
arrangements by contributing to an occupational or personal pension
scheme which is contracted out.
Neither Class 2 nor Class 4 NICs build up an S2P
entitlement. Therefore, for the time you are a self-employed
person, you will not be accruing an Additional Pension.
Full details about the State Pension and how
to claim it can be found in the State Pension section on this
website.
