The new State Pension - how does it affect me?
The State Pension changed on 6 April 2016. The new State Pension is intended to be more straight-forward than the previous one, but how does it actually work and will you qualify?
If you reach State Pension age on or after 6 April 2016 (i.e. you are a man born after 6 April 1951 or woman born after 6 April 1953) you’ll get the new State Pension. If you reached State Pension age before 6 April 2016, your State Pension will be paid under the old system, even if you defer taking it.
So what's changed?
Under the old system you may have received an Additional State Pension as well as the Basic State Pension.
But to get the Additional State Pension you had to have made full National Insurance contributions. Some people didn’t do this. They may have 'contracted out’ under their pension scheme (which means that they paid reduced National Insurance contributions and the scheme provided alternative benefits).
The new State Pension has removed this ‘two-tier’ system in favour of a ‘single-tier’ State Pension. For the tax year 2020/2021 this is a maximum of £175.20 a week or £9,110.40 a year. But you won’t necessarily be entitled to this full amount. It all depends on how many years of National Insurance contributions you have.
Don’t worry. If you aren’t sure whether you contracted out, when you contracted out or how many years you contracted out for, the Government will have a record of all of this. They will provide you with all of this information when you apply for a State Pension statement. You can read more about this under ‘How can I find out what I will receive?’
The amount of new State Pension you’ll receive depends on your National Insurance record. To qualify for the full new State Pension (which is £175.20 per week for the tax year 2020/2021) you will need to have 35 years of contributions. And to get any new State Pension at all, you will need to have a minimum of ten years’ contributions.
Contributions could be:
- National Insurance payments
- National Insurance credits, you may have received if you were unemployed, if you were ill, or if you were caring for a relative rather than carrying out paid work.
And it gets a little more complicated than this:
If you started paying National Insurance before 6 April 2016 your contributions from before this date will be converted into a starting amount for the new State Pension.
If you made full contributions and built up an Additional State Pension, it’s likely that your starting amount will actually be higher than the full amount of the new State Pension. In this situation you’ll get the full State Pension as well as keeping any excess as a protected payment, which will increase with inflation. But you won’t be able to continue to build up any more State Pension.
If you have a starting amount equal to the new State Pension you’ll also receive the full new State Pension amount, and you also won’t be able to build up any more State Pension.
Finally, if you were contracted out under the old system and have paid reduced National Insurance contributions for several years it’s likely that you will have a starting amount that is below the new State Pension. If this is the case you can continue to build up your State Pension amount until you reach the State Pension age, even if you already have 35 years of NI contributions.
How can I find out what I'll receive?
You can currently get a State Pension statement from the Department of Work and Pensions (DWP) to find out how much State Pension you may get and the number of qualifying years on your National Insurance record.
The forecast gives you an estimate of what you can expect in terms of your State Pension based on your National Insurance contributions.
To get a statement, call 0800 731 0175, or go to gov.uk/state-pension-statement.
How can I build up my new State Pension?
Your new State Pension will be based on your National Insurance record when you reach State Pension age. You can increase what you’ll get by adding to your National Insurance record before reaching this age by:
- Continuing to pay National Insurance contributions until you meet State Pension age.
- Apply for National Insurance credits – these can fill gaps in your NI record.
- Pay voluntary National Insurance contributions – these can also help to fill any gaps in your record.
- Defer when you receive your State Pension – this is another way to build up what you receive.