The State Pension
What you might get
A new State Pension system comes into effect from 6 April 2016. This page provides you with information on those reaching State Pension age (SPA) before 6 April 2016 and those reaching SPA on or after 6 April 2016 are affected.
With the new single tier State Pension having been introduced, what you might get depends on when you reched or will reach your State Pension age (SPA)
Reached your SPA before 6 April 2016
The previous rules apply to you if you have reached your SPA before 6 April 2016. You will not be affected by the new rules, even if you deferred taking your State Pension.
Basic State Pension (BSP)
The basic state pension (BSP) is a flat rate, set by the Government each year. The full BSP for 2016/17 is £119.30 a week. If you don't have enough National Insurance contributions credits to get the full BSP, you may be entitled to a lower amount based on the years of contributions or credits on your record.
You may be able to get a BSP or increase your BSP using your spouse or civil partner's national insurance contributions. This could be up to a maximum of £71.50 a week.
Additional State Pension (ASP)
The additional State Pension (known as the State second pension (S2P), formerly SERPS) is not a fixed amount. It depends on your earnings on which you paid national insurance contributions, and whether or not you were contracted out through your workplace or personal pension.
The additional State Pension is not available to you if you’re self-employed.
Graduated Retirement Benefit
What you get depends on what contributions you made between April 1961 and April 1975. For every £7.50 of graduated contributions you paid you get 13.30 pence in pension. Women who reached SPA before 6 April 2010 built up pension at a different rate - for every £9 of graduated contributions they paid they got 13.30 pence in pension.
Age 80s age addition
When you reach 80, your State Pension is automatically increased by 25 pence per week.
To get an estimate of your State Pension, please click here.
Reaching your SPA on or after 6 April 2016
The single tier State Pension has replaced the previous State Pension system. The starting value is set above the basic level of means-tested support, around £155.65 in today's money. You will be required to have 35 qualifying years of contracted-in National insurance contributions or credits and you must have no contracted-out benefits, in either a workplace pension scheme and/or personal pension to get the full amount. If you don’t have the full 35 years, you will get a pro-rata amount, provided you meet the new 10 year minimum qualifying period.
There are transitional provisions for those who have built up qualifying years or credits prior to 6 April 2016, to ensure that you will not receive a lower pension amount than you would have received under the previous system rules, so long as you meet the new 10 year minimum qualifying period.
At 6 April 2016 all the elements of your State Pension were consolidated into a single amount, the foundation amount.
When you reach State Pension age your figures will be calculated. These figures will then be compared with the foundation amount, the higher of these two figures will be paid.
The pension will be reduced if you contracted out of the additional state pension, to reflect the fact that you paid lower NI contributions whilst you were contracted out. You will be able to increase your pension up to the full level, at the rate of 1/35th of the full rate (£4.44 to the nearest penny) for each additional qualifying year.
Those reaching their State Pension age after 6 April 2016 can be split into four groups:
- Individuals who have the necessary 35 qualifying years, who have not been contracted out, who have only accrued a small amount of additional State Pension - will have a foundation amount which is equal to the single-tier pension.
- Younger individuals, with fewer qualifying years, or older people who have spent many years contracted out of the additional State Pension - may have a foundation amount which is less than the full level of the single-tier pension. These people will be able to increase their single-tier pension up to the full level, at the rate of 1/35th of the full rate (£4.44 to the nearest penny) for each additional qualifying year.
- Older individuals with many qualifying years, and who have not contracted out and have accrued a good additional state pension - Individuals with a foundation amount which is more than the full level of the single-tier pension. These peoples' foundation amount will be higher than the full single-tier weekly amount. They will receive a top up known as the 'protected payment'. The protected payment will be increased before state pension age and in payment by the rise in prices. They will not build up any further state pension from April 2016.
- Individuals whose National Insurance record is all accrued after 6 April 2016 will have their whole pension calculated on the new single-tier system.
If you are aged 50 or over you’re now able to request a pension statement under the new rules.
The pension statement will give individuals an estimate of how much they may get under the new State Pension based on their current National Insurance record. The statement offers an estimated amount, not a guaranteed amount, as it is based on an individual’s current national insurance record and doesn’t take into account future national insurance contribution years they may build.People under the age of 55 can still get a statement that gives an estimate of their State Pension, based on the rules of the existing scheme. Their statement explains that, in most cases, the estimate will be the least amount of State Pension that they may get when they reach State Pension age.
The Government will gradually extend the State Pension statement service until everybody of working age will be able to request one.
To find out more about the new State Pension system, please click here to read the Government's factsheet.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.