The new state pension
A state pension is regular income from the government when you reach state retirement age, and is paid in addition to your workplace or personal pension. From 6 April 2016, a new state pension kicked in. Below is everything you need to know.
To get the full state pension, you now need 35 years National Insurance (NI) contributions (previously it was 30 years) and a minimum of 10 years. It is only paid when you reach state pension age.
The maximum state pension anyone will get from the new state pension is £155.65 per week, but sadly not everyone retiring will qualify for this full amount, because of the new minimum NI contribution requirements. In fact, only 13% of retirees will get the full amount in the first year of the new rules.
If you don’t have the minimum 10 years of NI contributions, you will not get any state pension.
All women born after 6 April 1953 will reach state pension age after 6 April and retire under the new rules. Men born after 6 April 1951 will also retire under the new rules.
As it stands now, the state pension age is 63 for women and 65 for men, but this is steadily rising and will be around age 67 (or more) by 2028. You can calculate your current state pension age here.
How much will I get?
For everyone retiring after 6 April 2016, a flat rate of £155.65 is paid per week. This full amount is only payable if you have at least 35 years NI contributions.
You may get a lower amount if you haven’t paid the full level of NI contributions. If you have less than 10 years of NI contributions you will not get any state pension.
You may not have enough NI contributions if you have had a long career break, were employed but on low income, self-employed with low profits or maybe living abroad, for example. You can check your NI contribution record here.
If you think you may fall short, it is possible to pay voluntary NI contributions if you are eligible. You can check your eligibility here.
This sounds technical, but it’s important.
If you were contracted out of National Insurance, you will have paid a lower rate and will not get the full state pension of £155.65.
For every year you were contracted out, your state pension will be reduced.
Although contracting is abolished from April 2016, it will still impact your payments.
You may have been contracted out, without even knowing it, for a number of reasons. For example, if you joined a final salary scheme offered by your employer, you most certainly will have been contracted out. NHS workers, local authority employees, teachers and civil service workers are those most likely to have been contracted out as well.
If you took up a private pension, you may have opted to be contracted out and your NI would have been paid into your private pension instead.