The Basic State Pension and new flat-rate State Pension explained

The Basic State Pension is the first level of income you get from the Government when you retire. For the financial year 2015-16, it stands at a maximum of £115.95 per week for a single person, or £231.90 per week for a married couple. You'll need 30 'qualifying years' of National Insurance contributions or National Insurance credits to get the full amount. If you're over 80, you'll get at least £69.50 a week.

 

If you reach State Pension age on or after 6th April 2016, you'll receive the new single State Pension. This is currently going to be set at not less than £155.65 per week. But in order to receive that amount you need 35 'qualifying years' of National Insurance contributions or National Insurance credits.

If you have missing years (perhaps from raising a family, or travelling) then you won’t qualify for the full State Pension. However, you can top up your National Insurance contributions so that you get the full entitlement. You'll need at least 10 years to get any State Pension.

You can get a State Pension estimate from the GOV.UK website.

Legal firm Hymans Robertson has highlighted the winners and losers of the State Pension changes. In general, the winners are the self-employed, public sector employees and low paid women while those contracted in and contracted out, even for a short period, will be worse off.

Photo credit: Hymans Robertson

However, a recent report from the Department for Work and Pensions (DWP) says that workers who have been contracted out will also do well as they can build up more State Pension each year than they can under the current pension system. Those who have low amounts of additional pension on their National Insurance record, like low earners and those who took career breaks before 2002, are also likely to benefit.

On the other side, savers who have what's known as a foundation amount of qualifying years that's less than the new State Pension and are very close to State Pension age won't have enough time to make up the difference under the new system. People who have fewer than 10 qualifying years, including those who became UK residents in later life and those who have spent time in prison, won't get any State Pension so they're likely to lose out as well. 

The good news is that people who are set to retire before April 2016 are able to top up their State Pension by between £1 and £25 a week. Read more at Boost your State Pension by £25 a week. If you aren't, you could still pay extra voluntary National Insurance to make up contributions. 

According to figures from the DWP, most people in their 20s, 30s and early 40s will be among the worst off, with those retiring mid-century having an income that's 10% lower than it would be under the current system.

You need to claim the State Pension. You should receive a letter telling you what to do four months before you reach State Pension age. If you haven't received one, call the State Pension claim line on 0800 731 7898 (Monday to Friday 8am-6pm).

For more on this, read How to top up your State Pension or How to get a State Pension forecast.

The Additional State Pension is currently available to people reaching State Pension age before 6th April 2016.

What you get depends on how much you've earned during your working life, and your National Insurance contributions and credits.

You don't have to claim it, it will automatically be paid to you when you reach State Pension age, providing you've claimed the Basic State Pension.

You can contract out of the scheme, if your employer offers a contracted-out workplace pension. This will reduce your National Insurance contributions and you may also receive a rebate.

Pension Credit is a benefit for retirees on low incomes. There are two parts to it: Guarantee Credit and Savings Credit.

If you live alone, it can top your income up to £151.20 or up to £230.85 if you're a couple.

Savings Credit is an extra payment for people who saved some money towards their retirement, for example via a company pension. You can receive up to £14.82 if you're single, or up to £17.43 if you're a couple.

You need to apply for Pension Credit. You can call 0800 99 1234 (textphone: 0800 169 0133) Monday to Friday between 8am and 6pm. You can apply up to four months before you reach State Pension age.

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If you decide to retire abroad, how much State Pension you'll receive depends on where you live. You won't get the annual increases if you live outside the European Economic Area, Switzerland and certain other countries the UK Government has an agreement with.

You should be sent a claim form four months before you reach State Pension age.

If you don't, contact the International Pension Centre (tvp.internationalqueries@dwp.gsi.gov.uk).

You don't have to take your State Pension as soon as you reach State Pension age. If you don't need the money, you can defer your State Pension.

If you reach State Pension age before 6th April 2016, your State Pension will increase by 1% for every five weeks you defer it. If you defer for at least a year, you can choose to take your extra amount as a lump sum.

If you reach State Pension on or after 6th April 2016, you can also defer. The exact amounts haven't been announced yet, but it's likely your State Pension will increase by 1% for every nine weeks you defer.

If your spouse or civil partner dies before 6th April 2016, you could inherit part of their Additional State Pension, half of their protected payment and part or all of their deferred State Pension.

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