The future of State pensions

The Government has started the clock on its 500-day countdown to the flat-rate State pension, but if you thought that having this new pension regime was going to make things simpler, you would be wrong.

So here we go through some of the aspects of the current State pension and the new State pension that you will need to know about:

What is the current State pension worth?

The current State pension applies to you if you were a man born before April 6, 1951 or a woman born before April 6, 1953 – in other words, you are going to reach retirement age before April 6, 2016.

Under the existing rules you need to have 30 qualifying years to get a full basic State pension, which currently stands at £113.10 per week. For married couples or civil partners, this rises to £67.80 each per week.

You may also be entitled to the Pension Credit to boost your pension if you are eligible, which will give you a minimum income of £148.35 per week.

How does the Pension Credit work?

The Pension Credit is designed to help lower earners to get a boost to their State pension, but it is income-related so the amount you get will depend on your income from all sources.

There are two parts to the Pension Credit – the Guarantee Credit which will be added to your weekly income to boost it to £148.35 for a single person or £226.50 for a couple, while the Savings Credit adds money to those who have saved some money towards their retirement.

To qualify for the Savings Credit, you need to work out your income, which includes your State pension – whether you are taking it or not – other pensions, most social security benefits, savings and investments over £10,000 and earnings.

If you have savings over £10,000 then £1 would be counted as ‘income’ towards your pension income calculation for every £500 or part of £500 you
have over this figure, whether you are able to receive that much from each of those £500 or not.

The Pension Credit will remain under the new State pension, but the Savings Credit will no longer apply.

Boosting your State pension further under the current rules

If you want to boost your pension still further, you can defer when you take your pension and you will get an extra 1% of your pension for each five weeks you delay taking it – equivalent to 10.4% for every full year you delay your claim.

So, if you took your basic State pension now it would be worth £5,881.20 per year, and if you delayed it by a full year you would get an extra £611 a year for doing so, which will increase in line with inflation each year.

You can get the money you are owed for deferring as a lump sum if you wish, and it would include interest at 2% above the Bank of England base rate. But this would be considered income and if you have already got other income it would be taxed at the highest rate of income tax you would pay for that year. So if this tipped you into the higher rate tax bracket, for example, you would pay 40% tax on that lump sum.

You would need to get face-to-face advice before delaying your State pension, which you can find via a county search here

If you or your partner receives the Pension Credit, you cannot defer your State pension.

What is contracting out?

If you paid into what has been variously known as the State Earnings Related Pension (Serps), the State Second Pension (S2P) or the Additional State Pension, you may get an uplift in your State pension when you retire. You would get this automatically if you were earning above prescribed amounts, unless you chose to contract out of one of these at any stage in the past. You are only able to contract out of a defined benefit scheme currently, the ability to contract out if you are in a defined contribution scheme has already been removed.

Some people chose to contract out because it gave them the opportunity to have a rebate of their NI contributions that they could then put into their own private pension pot – known as a ‘contracted out pension scheme’.

For the 2014/15 tax year, you must be earning more than the lower earnings limit of £5,772 to be able to contract out of the Additional State Pension, and your employer must run a contracted out pension scheme for you to do so. You must also be under State pension age.

What if you contracted out years ago?

If you were a member of a contracted-out, salary-related workplace pension scheme prior to April 6, 1997 you would be entitled to a Guaranteed Minimum Pension – so you should check with your employer or get in touch with the Pension Tracing Service to ensure you get this.

This service is also the way to find any employer pensions that you may be entitled to but have forgotten about. You should make sure every penny you are due in retirement is coming your way.

Claiming the new State pension

You will be able to claim the new State pension if you were a man born on or after April 6, 1951 or a woman born on or after April 6, 1953.

You must also have a minimum of 10 qualifying years on your National Insurance record, but they do not need to have been obtained in a row.

What is a qualifying year?

To have a qualifying year, you must have been working and paying NI contributions, or getting NI credits if you were unemployed, sick or a parent or carer. You would also qualify if you were paying voluntary NI contributions.

How these credits can be claimed and the situations under which you could claim them is detailed on the website

How can I qualify for the full amount of the new State pension?

Under the new rules which come in on April 6, 2016, you will need to have 35 qualifying years to get the full flat-rate State pension, which will be a minimum of £148.40 per week but the exact amount will be outlined in autumn 2015. It is expected to be around £155 per week.

What if I was not working?

If you were raising a family or caring for someone, you lived abroad or were unable to work because you were sick, wrongly imprisoned or simply unemployed for a period of time, you would be able to get what was known as ‘Home Responsibilities Protection’ before April 2010, and ‘National Insurance Credits’ from April 2010 onwards. This provides a way of you claiming credits for qualifying years while you were not able to work.

Click here for more information on how and when these could have been claimed.

It is important that you check that any years you could have claimed either HRP or NI Credits are accounted for and any credits applied, as it will make a difference to the amount you can receive as a State pension. The Carer’s Credit would apply if you have been caring for someone for at least 20 hours a week.

To find out more about your NI Credits and get a statement of your NI account to see how many qualifying years you have, you can apply online via or by calling 0300 200 3500, or 0300 200 3519 for textphones.

What was the Married Woman’s Stamp?

Married women were allowed to pay what was called the Married Woman’s Stamp or ‘Small Stamp’ prior to April 1977, which reduced the amount of NI they were paying, but it also controversially has left them with much smaller State pensions than they were expecting – something they were not aware of at the time. The idea was that their husband’s contributions would give them an additional amount of State pension, but this still resulted in a lower State pension overall.

If you were one of the women paying this lower rate of NI before 1977, there is a chance that you are still paying the lower NI rate of 5.85% of weekly earnings between £153 and £805 instead of the standard rate of 12%. If so, you should check exactly what your State pension entitlement will be, because if you are still working you can choose to give up paying the reduced rate and boost your entitlements.

If you are married you need to fill in form CF9 or CF9A if you are a widow and return it to HM Revenue & Customs.

If you do choose to pay the full NI rate, then you must tell your employer. Failing to do this could result in you getting an NI bill from HMRC for underpayments, which could come as a nasty shock.

Can I get more than the new flat-rate State pension in any way?

Yes, if you want to defer taking your State pension you will be able to get a 1% uplift for every nine weeks that you defer your pension, which works out at around 5.8% if you defer for a full year.

For example, if you took your State pension as soon as you were able to after April 6, 2016 you would get £148.40 – or whatever the decided rate is – per week, equivalent to £7,716.80 a year. Defer this for a year and you would get an extra £446 a year. This amount will increase in line with inflation each year.

That is less than the current State pension deferral, isn’t it?

Yes, it is. Actually, the deferral uplift rate is almost half as much as the current 10.4% as you are getting an uplift of 1% for every nine weeks deferred under the new State pension from 2016 compared with every five weeks for the current pension.

If you are healthy and expect to have a long life expectancy, then deferring now if you reach the State retirement age before April 6, 2016 could be a good idea – although you should take financial advice before making any decisions. But if you are in ill-health then deferring your pension may not be sensible.

To benefit from deferring under the new State pension, you would have to live for around 19 years following that deferral said Tom McPhail, head of pensions research at Hargreaves Lansdown. Under the current system, you would need to live for just 10 years to benefit.

So, if I reach retirement age before April 6, 2016 can I defer my retirement to qualify for the new State pension?

No, you are not able to do this. If you defer your pension until after that date, you will still receive the current (old) State pension and will simply receive the amount deferred under the current rules.

You will only qualify for the new State pension if you reach retirement age after April 6, 2016.



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20th Jan 2015
Thanks for voting!
Current state pensioners will stay on the £113.10 plus the additional pension of SERPs / S2P and Pension Credit (savings).

More than half of all pensioners who retire on and after 6 April 2016 will not get the £148-£155 flat rate state pension.

In fact, people are getting flat rate state pension forecasts
who are retiring next year on and from 6 April 2016
of as little as £55 per week,
with no additional pension,
even with 35 years of National Insurance record needed.

See detail in the Why This Important section below petition:
26th Dec 2014
Thanks for voting! last some information came through..under the current scenario I would get £10 more than the basic state pension - due to superannuation accrued - ..under the new flat rate I will get at least £25 less than the new pension..I see now.. we'll lose out even though it was never our intention, as we did not know when we opted out, the actual effects and costs to us..indeed, as the figures show, I would have got slightly more..I appreciate that I have my teacher' pension but that is well deserved..would you teach for more than 30 years?..exactly!..very annoyed and this is not over yet..
26th Dec 2014
Thanks for voting!
The flat rate pension actually leaves a substantial number of women born from 1953 and men born from 1951 with NIL STATE PENSION FOR LIFE and for the bulk of the rest LESS NOT MORE state pension.

The money is sitting pretty and wrongly being called a surplus by all parties in the ring fenced and full National Insurance Fund since 2013, when the payout at 60 to a woman and 65 to a man was not paid out, so beginning the loss of 7 years payout to a couple.

There are all kinds of reasons why this is happening under the Pension Bill 2014 that brought in the law of the flat rate pension 2016.

See my petition as to why for each group who lose vital food and fuel money.

The flat rate pension also does not pay out at all the tiny top up to even tinier part basic state pension to someone who turns 80 in 2016.

For many people, the state pension is the sole income in old age as they never had enough money to pay for a private pension and works pensions can have been lost or be the average for the low paid of merely 4 per cent lowest income.

Half of over 50s / over 60s are within the working poor, and the state pension is payable if remain in work or lose your job with all the massive austerity job cuts that will now double since the Autumn Budget.

As it would absolutely nothing to repeal the Pension Bills 2010-2014 and revoke the flat rate pension 2016 (by revoking the Pension Bill 2014), paying the state pension at 60 to the wife, would also cut the benefits bill.

Because as state pension law stands now, the over 60s may remain on benefit for the rest of their lives, with no other income, and benefit may cease altogether, with the Autumn Budget telling us that state spending will return to the levels of the 1930s, before the 1945 welfare state.

97 per cent of benefits bill is to the working poor and poor pensioners, with the bulk going to those in work on wages far far below a living wage and the poor pensioners, only on state pension, far far below the breadline (2.6 million - source Age UK).

You gain the state pension and save people your own age from a penniless old age, with no money at all for food and fuel. So give the Xmas gift that keeps on giving to us all.
1st Dec 2014
Thanks for voting! a retired teacher..still under 65..I was looking forward to a full state pension..despite being contracted out for over 20 years I still had 42 years NI contributions in total..the DWP has still not told me what I'll get under the new arrangements, despite asking some three weeks ago when I was told it would take 10 days..
26th Dec 2014
Thanks for voting!
SERPS (that became State Second Pension 2002) is abolished by the flat rate pension, so you will not get the full state pension that is added by the additional pension.
26th Nov 2014
Thanks for voting!
Question, I am already retired and have been drawing my pension for 12 years , will my pension be increased to the new rate???
26th Dec 2014
Thanks for voting!
25th Nov 2014
Thanks for voting!
Very good clear article. I used to work for DWP so I know how confusing benefits can be!
Thanks for voting!
Thank you startuff67 🙂
26th Dec 2014
Thanks for voting!
Because of the raised retirement age, people 60-68 are liable for all the benefit sanctions that have reached 1 million per year, leaving people with no funds for months at a time.

A man on Universal Credit benefit, informed his retirement age is 68, has found under the UC benefit rules that as his wife is 5 years younger than him, he will not be granted his state pension payout til he is 73. This means any such person is still liable to the Bedroom Tax, benefit sanctions and the losses of benefit for disability / chronic sickness.

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