The State pension has changed for people who are retiring from April 6th 2016 onwards.
Instead of the old system where people had a basic state pension (£119.30), and made contributions towards an additional state pension (depending on their age and income) there is now a single flat rate for everyone of £155.65.
…except that it’s not going to be that for everyone. Sorry!
how does the the flat rate State pension work?
WARNING: These are going to be a bit complex!
- Anyone who has already made any NI contributions will have a ‘starting amount’
- It will be based on two calculations
- the first is what you would be due if the new rules had been in place throughout your career
- the second is what you have already built up in the old system.
- If the amount you have built up in the old system is higher than the flat rate, then that will be protected, and paid in addition to the flat rate state pension
- However, this is frozen, so if you are working you will continue to pay into the system until your retirement age without receiving any extra benefit from it.
You might not get the full flat rate State pension
The description of the flat-rate pension as such is misleading to start with.
In the first year of operation only 37% of those retiring meet the requirements – with women even less likely to qualify, so don’t be surprised if you don’t get the full amount.
There are two reasons for this:
- You might not have paid enough National Insurance contributions in your working life.
You need to have built up 35 years of National Insurance contributions to get the full amount which is higher than the old requirement of 30 years. Many women have failed to build up the minimum 35 years of contributions required in order to qualify for the full state pensions.
- You might have contracted out. Anyone who has been a member of a final salary pension scheme that was contracted out – or contracted out of the state second pension into a private pension – will have that reflected in a lower state pension payout. The idea is that the government has calculated how much benefit you have had from the pensions you built up as a result of contracting out – and in order to be fair has deducted that from your flat rate state pension – so everyone gets the same.
How do I find out more and check I’m getting what I am entitled to?
ANOTHER WARNING: Even Government departments aren’t entirely sure how this works so it’s possible that you will get false information when you ring the DWP!
Having said that though, it’s still worth phoning them up if you are just too confused by it all.
Before you do that though, have a read of the information in Gov.uk here. Also, this information on Which.co.uk is a help.
If you haven’t retired yet and you’re wondering how much State Pension you will get when you do get to that age, you can get a pension forecast at the Gov.uk site here, or you can ring them on 0345 3000 168.
If you’d like to know of all the other great benefits you can get once you’re over 60, including free travel, cheaper dental and medical treatment and lots more, take a look at our article about it here.