Old state pension guide

How much do you get and can you boost it?

Old state pension guide

The state pension was overhauled – and a brand-new flat-rate pension ushered in – on 6 April 2016. But not everybody has benefited, including millions of older men and women who had already retired.

Our guide will help you understand whether you're on the old or new state pension system, explain how much you're likely to get and show you how you can boost it.

In this guide

This is the first incarnation of this guide. Please suggest any changes or questions in the Old State Pension discussion. Thanks to Alan Higham formerly of PensionsChamp and Danny Cox of Hargreaves Lansdown for their help with the guide.

What is the old state pension?

The basic state pension is a Government-administered scheme, funded by national insurance (NI) contributions.

It gives people who've reached state retirement age before April 6 2016 a guaranteed weekly income – £129.20 a week for 2019/20 – until they die.

But instead of a flat-rate payout like the new £168.60 a week state pension, the old state pension is made up of two parts.

The first element is the so-called 'basic' state pension.

This is simply worked out by totting up the number of eligible NI years you have.

These qualifying years are earned by working and paying NI contributions in a given year, if you're a carer, or if you're on certain benefits.

The most basic state pension you can currently earn is £129.20 a week, a maximum level which rises every April by the biggest of the following:

  • inflation in the previous September (using the Consumer Prices Index);
  • the increase in average earnings;
  • or 2.5%.

This is known as the 'triple lock' – a device to ensure older generations get the best deal possible.

The second element is known as the additional state pension.

This extra payout is called either Serps (state earnings-related pension scheme), S2P or the State Second Pension.

Like the basic state pension element, it is based on your NI contributions.

How much you get largely depends on what your salary was throughout your career and, to a lesser extent, whether you've claimed certain benefits such as child benefit or carer's credit.

The maximum you can get in 2019/20 is £176.41 a week. Remember, this is on top of the maximum basic state pension of £129.20 – and could potentially take your total state pension to £305 a week. Most people, though, don't get anywhere near this amount.

You get the additional state pension paid automatically with your basic and it increases every year with inflation.

Do I qualify for the old state pension?

To qualify for the old state pension you need to have worked and paid NI contributions, or been on qualifying benefits.

You need to be a man born on or before 5 April 1951, or a woman born on or before 5 April 1953

To get the FULL basic state pension you need 30 'qualifying years' on your NI record.

In other words, to get the full basic state pension you'll need to have worked for most of your adult life and paid NI contributions, or been on qualifying benefits.

The actual amount you're entitled to is calculated by the number of NI qualifying years you've accumulated. So if you've got 20 years' worth, you'll get roughly two thirds of the full amount.

What counts as an NI qualifying year?

To gain a qualifying year, you need to have earned a set minimum during a tax year (6 April to 5 April) and pay the required NI contributions. For 2019/20, the minimum is:

  • £6,136 for employees.
  • £6,365 for the self-employed.

In past years, the amount was of course lower but it has always been in relation to average salaries. So only those on very low wages may have missed out.

If you were working full time, even on the minimum wage – or had a job for a few days each week throughout the year – it's likely you earned a qualifying year.

Quick questions:

  • If you looked after children, or were unable to work, this is taken into account. You may be eligible for NI credits, which count as a qualifying year.

    These are normally automatically awarded for the weeks you were claiming and receiving any of the following benefits: carer's allowance, jobseeker's allowance, incapacity benefit, employment and support allowance.

    You also get them if you are a full-time parent who claims child benefit for someone under 12, or a full-time carer who claims income support.

    Credits for parents and carers replaced home responsibilities protection from 6 April 2010.

    If you reach(ed) state pension age on or after 6 April 2010 and you had years of home responsibilities protection before 6 April 2010, these years have converted into credits, up to a maximum of 22 years. These will go towards your basic state pension.

  • You may still be entitled to a PARTIAL state pension, but it depends on when you hit retirement age and how many qualifying years you have.

    Retirement age hit BEFORE 6 April 2010:

    If you had fewer than 25% of the qualifying years (44 for a man, 39 for a woman) then you wouldn't be entitled to a basic state pension. If you have 25% or more, it's likely you're getting an approximate pro-rata weekly income. In other words, if you'd half the qualifying years you'd get roughly half the full state pension.

    However, if you don't qualify for the basic state pension and have no other income you're usually eligible for Pension Credit, which ensures you receive a guaranteed minimum income. For more information see our guide on Pension Credit.

    Retirement age hit on or AFTER 6 April 2010 (but before April 2016):

    If you have at least one qualifying year, you'll get one 30th of the full amount for each qualifying year. Therefore, if you've 18 qualifying years you'll get 18/30th (three fifths) of the FULL state pension.

    Retirement age hit in April 2016 or AFTER:

    You will need to have at least 10 qualifying years to get anything. If you have between 10 and 35 qualifying years, you'll get a pro-rata rate.

    You can boost your pension by buying qualifying NI years – we detail how, when and whether you should do this below.

  • Once you reach the official retirement age you can claim your state pension, no matter where you live. However, what happens then depends on where you retire to.

    In some countries, your pension will be frozen at the amount you're able to claim in the year you leave the UK. This may be fine now, but future inflation's likely to mean that you get less and less in real terms with each passing year.

    To continue to get pension rises as if you're in the UK, you'll need to retire to:

    any country in the EU, Barbados, Bermuda, Bosnia-Herzegovina, the Channel Islands, Croatia, Isle of Man, Iceland, Israel, Jamaica, Liechtenstein, Mauritius, Montenegro, Norway, the Philippines, Serbia, Switzerland, Turkey, the United States of America or Macedonia.

    Retiring to popular destinations like Canada, Australia, South Africa & New Zealand mean your pension won't be increased each passing year, as it would have done if you stayed in the UK.

  • Your state pension might be affected if you're transgender and you:

    • Were born between 24 December 1919 and 3 April 1945
    • Were claiming state pension before 4 April 2005
    • Can provide evidence that your gender reassignment surgery took place before 4 April 2005

    You don't need to do anything if you legally changed your gender and started claiming state pension on or after 4 April 2005 – you'll already be claiming based on your legally recognised gender.

When will I get the old state pension?

You qualify for the payout at the Government's official retirement age – but this isn't set in stone.

Yet for decades after 1940, it was: men received it at 65, women at 60.

But in 1995 the then Government decided to equalize the ages, starting in 2010 and rising in staggered dates – often rising by months at a time. By April 2016, it had risen for women from 60 to 63 while staying at 65 for men. It is now in the process of going up to 66 for men and women by April 2020 and then is expected to rise further later.

The increases have triggered confusion for millions of women who've struggled to work out when they're due their pension.

To find your exact retirement age see the Government's State Pension Age Calculator

The state pension age for men and women

  BORN OFFICIAL RETIREMENT AGE
Men Before 6 December 1953 65
  On or after 6 December 1953 It will rise from 65 to 66 between December 2018 and April 2020.
Women Before 6 April 1950 60
  On or after 6 April 1950 Rising from 60 to 66 by April 2020.

How much state pension will I get?

There's a complicated maze surrounding the amount you get, but here's a brief summary:

  • A single person in 2019/20 will get £129.20 a week of basic state pension; that's £6,718.40 a year .
  • If you're married, and you and your partner have built up the full number of state pension qualifying years, you'll get double that amount, so £258.40 a week.
  • If you're on a low income, you can boost your state pension by claiming Pension Credit. . For more info, see the full Pension Credit guide.

But, there's another crucial fact to remember...

The basic state pension is taxable, but if you don't have any other income, you won't be taxed. You only start to pay tax if you earn more than £12,500 (in the 2019/20 tax year)

That said, if you defer your pension any lump sum income you take is taxed differently.

The figures above are only rough guides as many other variables affect the amount you will get. You can try Gov.uk's calculator for an indication. The best way to find out is to ring 0800 731 7898 (option 1).

Quick questions

  • Yes. A pension counts as if it were any other income so will affect your entitlement to pension credit, housing benefit or council tax support. See the Benefits Check-Up guide

  • Yes. It rises every April. There's a system called the 'triple-lock' in place at the moment. This means every April the basic state pension amount increases by the highest of the previous September's inflation rate (based on the Consumer Prices Index), the increase in average earnings, or 2.5%. The 'triple-lock' is expensive and its future is under review.

    However, your pension may not increase every year if you retire to certain countries outside the UK.

How can I boost my state pension?

There are four ways you can boost the amount of state pension you'll receive, but all need to be considered carefully before deciding what to do.

1. Defer taking your state pension

You can put off claiming your basic state pension. This can be especially useful if you're still working, as it means you'll get larger state pension payments later. You can also defer receiving payments once you've already started claiming, though be careful as you can only do this once.

If you choose not to take your pension straightaway when you reach state pension age, there are two different ways you can take the benefit:

  • Choose a bigger weekly pension...

For those who qualified for the state pension age before April 6 2016 and opted to delay, a year's wait was worth the full value of that year's state pension plus 10.4% extra.

It worked out that, for every five weeks you delayed claiming, your future weekly allowance was increased by 1%. So delay for a year and you'd have got the full pension plus 10.4% extra.

However, those who reach state pension age on or after 6 April 2016, have not been given such a generous deal.

Now the 1% rate of increase for deferring your state pension only applies for every nine weeks you delay – not five. This works at an annual boost of 5.8% – a vastly lower benefit.

pot of money
  • Or as a one-off lump sum later...

If you reached your state pension age before April 2016, you have had the option to be able to defer and then be paid the extra as a one-off lump sum.

This is made up of the deferred payment plus interest at 2% above the Bank of England base rate . After collecting the lump sum, you then get the standard pension.

So someone who'd built up an annual state pension of £6,000 say would get £6,150 in twelve months' time – and then be paid their weekly payout as normal.

However, this lump sum option has been abandoned for those who become eligible for state pension after April 2016.

Quick question

  • The answer to this lies in your longevity – and there's no crystal ball that can tell you how long you'll live. The Office for National Statistics produce a 'How Long Will My Pension Need to Last' calculator, which shows that on average a man aged 65 has 21 years to live and a woman aged 65 has 24 years.

    So the odds suggest that if you can afford to defer, you're probably better off doing so because the extra cash will be paid for long enough to make it worth it.

    There are risks of course: put off claiming for five years and you'll have forgone £30,000 in income. Although you'll then get a higher state pension payout, if you were to suddenly die, you'd have lost out on a huge sum.

    But if you're generally fit and healthy, it can be a canny way to boost your income in old age.

2. Buy more 'pension years' if you've already hit state pension age

It's possible to pay to replace some missing NI qualifying years, or part years, which could mean a massive increase in your basic state pension payout.

For some, buying NI years now could mean more than £1,000 a year extra.

How many NI years do you have?

This is the key that defines whether it's worth bothering. HMRC should send out notices to people with NI gaps.

If you haven't received one or can't find it, don't worry. You can check whether you have any gaps online by getting a State Pension Forecast or calling the Future Pension Centre on 0845 3000 168 and it'll send you a statement.

The NI years needed for a full basic state pension are:

TABLE_CELL_STYLE MEN WOMEN
Reached state pension age pre-6 April 2010 44 39
Reached state pension age on or after 6 April 2010 30 30
Reached state pension age on or after 6 April 2016 35 35

Just retired or close to retirement? Some people could buy an additional six years from between 1975/76 and 2003/04, on top of the previous six years. This only applies to those who reached state pension age between 6 April 2008 and 5 April 2015. 

3. Do you qualify for Pension Credit?

If you don't have enough money to buy additional NI years and get the full state pension, your pension may be boosted when you apply for Pension Credit. All your money including savings will be assessed, and if you don't have enough to buy extra NI years you'll be topped up to the full basic state pension and then get pension credit on top of that, if you're eligible. For full information on pension credit, see the Pension Credit guide.

If you are eligible, pension credit will usually top you up beyond the full basic state pension, so you don't have to buy extra NI years. Call 0800 99 1234 to find out.

Can my spouse's pension be passed on to me when they die?

With the old state pension – for people reaching pension age before 6 April 2016 – if your spouse or civil partner passes away, then just as in life, the pension you receive can be based on their national insurance contributions if their record is better than yours. For example, if you took a career break, you could use their years of NI contributions to plug that gap.

In addition to their state pension, if your spouse or civil partner reached state pension age before 6 April 2016, you may inherit some of their state pension top-up and half their 'graduated retirement benefit' (the earnings-related state pension that people could build up between 1961 and 1975), if applicable. You may also inherit some of your spouse or civil partner's deferral payment if they put off claiming their state pension.

How to work out what you'd get

The Department for Work and Pensions provides an online tool which allows you to see what you may get if your spouse or civil partner dies.

However, be aware that you will not get anything if you remarry or form a new civil partnership before you reach state pension age. There are more details on how this works on the Gov.uk website.

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