The state pension has undergone a huge change. While the Government's aim is to make it fairer for all and easier to understand your retirement income, it’s still a minefield for most - and some will lose out with the overhaul.
This guide helps you understand the new 'flat-rate' £155.65 state pension which came into force on 6 April for those who reach their state pension age on or after this date.
There was much talk from politicians in the EU referendum campaign about the possible impact on the state pension. It wasn't about changes to the pension itself, but rather a prediction that there would be a huge economic downturn and the state pension would need to be cut to pay for it.
So for now the state pension stays the same. Whether there'll be any change to it is a question of policy for future Governments, but there's nothing definite planned currently. See Martin’s Q&A for answers to more questions like this.
In this guide...
This is the first incarnation of this guide. Please suggest any changes or questions in the New State Pension discussion. Thanks to Alan Higham of PensionsChamp and Danny Cox of Hargreaves Lansdown for fact-checking and their help putting the guide together.
What is the difference between the old and new state pensions?
A brand new state pension was ushered in on 6 April 2016 as a result of a massive shake-up. The new payout has been designed to make the whole process easier to understand though it's still far from simple.
However, it's only for those who reach state pension age on or after 6 April. This means millions of older people will be unaffected and carry on receiving their state pension under the old system at the same time as the new one comes into effect.Here are the key differences at a glance...
|Old state pension||New state pension|
|How it's made up||2 parts: basic pension + additional pension||1 flat rate payment + any 'protected payments'|
|Maximum weekly payout||£119.30 basic (+ avg £40 additional)||£155.65 + any 'protected payments'|
|NI years needed for full rate||30||35|
|NI years to qualify for min payment||Any||10|
When will it be paid to me?
Just as under the old system, you receive the new state pension when you reach the Government's official retirement age. But what that is depends on when you were born and your gender.
To save the state money, the official retirement age is gradually being raised. While many women currently get the state pension at age 63 and men at age 65, the thresholds are moving up. They will rise to at least 66 for both by 2020, and possibly to 68 in the 2030s.
The rising age for women has triggered much controversy. Campaign group Waspi - Women Against State Pension Inequality - has fought against the pace of change in women's state pension age.
It argues that the speed of the rise in women's age has caught millions unawares and says the Government has not properly communicated the changes to them, whether by post, online or by advertising. However, the Government has so far refused to change the speed of the age rises, or make any concessions.
The state pension age for men and women
|Born||Official retirement age|
|Men||Before 6 December 1953||65|
|On or after 6 December 1953||Rises from 65 to 66 between December 2018 and April 2020.|
|Women||Before 6 April 1950||60|
|On or after 6 April 1950||Rises from 60 to 66 between April 2010 and April 2020.|
To find your exact retirement age see the Government's State Pension Age Calculator.
How to claim it
It might feel like an official life milestone but you won’t get your State Pension automatically – it’s up to you to claim it. Four months before you reach your state pension age – currently 65 for men, 63 for women - you should get a letter from the Government’s Pension Service telling you what to do.
If you still haven’t got a letter three months before your State Pension age, call the telephone claim line where staff will be able to discuss with you what you need to do.
You’ve three ways to claim: online by filling in a claims form on-screen; over the phone by calling 0800 731 7898; or by downloading a claim form at gov.uk, printing it off and sending it to your local pension centre whose address can found on the Government website.
How much state pension will I get?
Assuming you're the right age, what you get depends on how many so-called 'qualifying years' of National Insurance (NI) contributions you have. These are earned over your lifetime and the number you get will depend on how many years you're in work.
You can also build them up as National Insurance credits instead, for time spent raising a family, if you care for the sick or disabled, or have spent time enrolled in full-time training.
Here's what you need...
To get any state pension at all
Under the new state pension rules, you need a minimum of 10 years before you'll get any payout at all. Reach this and you'll be paid 10/35ths of the total - currently £155.65, or about £44. These qualifying years can be from before or after 6 Apr 2016 and don’t have to be 10 years in a row - they can be dotted about over a much longer period.
However, if you don't manage to meet this minimum, you won't get a penny (although pension credit should be available). Under the old system, there was no minimum threshold - you could still get a small payout even if you had just 4 or 5 years.