State pension explained How much state pension will I get?
The rules on how much state pension you can get are complicated, and they all changed in April 2016. Here we explain how it works.
Video guide: State pension changes explained
In this short video, a Which? Money pensions expert explains the key changes in 2016.
How much new state pension will I get?
The state pension entitlement rules changed radically on 6 April, 2016, for men born on or after 6 April 1951 and women born on or after 6 April 1953.
The government introduced a ‘single-tier’ state pension with a ‘full level’ of £155.65 a week (£8,092 a year). We explain more about these terms, below. The previous system, where you could pay full National Insurance (NI) and get additional state pension - or you decided to ‘contract out’ of doing this – was scrapped.
And whereas previously you were entitled to a full pension after 30 years of NI contributions, it’s now 35. To qualify at all, you need 10 years of NI payments.
How much state pension will I get if I qualified before 6 April 2016?
If you reached state pension age before 6 April, the changes don’t affect you; in this case, the basic state pension is £119.30 a week (£6,204 a year) in 2016/17.
If you’re married, and both you and your partner have built up state pension, you’ll get double this amount – so £238.60 a week. But if your partner hasn’t built up their own state pension, they'll still be able to claim a state pension based on your record.
You may also have built up some additional state pension, previously known as the State Earnings Related Pension Scheme (Serps) or state second pension (S2P). If you did so, you’ll get more than £119.30 a week.
How much state pension will I get if I qualified on or after 6 April 2016?
If you reach state pension age on or after 6 April 2016, the starting point for calculating what you get is the ‘full level’ of the new state pension: £155.65. But the name is confusing because you may get more or less than this.
If you have made full National Insurance (NI) payments, building up additional state pension, you’re likely to get more. If you ‘contracted out’ and paid reduced NI contributions for several years, you’re likely to get less.
You’ll get whichever is higher - the amount you would have got on the last day of the old system or the amount you would get had the new system been in place over the whole of your working life.
Government estimates show that only around half of those retiring over the next year will qualify for the full state pension.
Find out more: What's happening to the state pension in 2016?
What was ‘contracting out’?
To cut the bill for the state pension, the government previously allowed pension savers to 'contract out' of being part of the second state pension scheme. You paid less National Insurance (NI) and didn't get the additional state pension, and the money you saved in NI was put into your workplace or private pension.
What if I’ve been contracted out?
If you were contracted out, you've been making NI contributions at a reduced rate (in a final salary scheme), or receiving a rebate into your pension (in a ‘defined contribution’ scheme, where you build up a pension pot).
Under the new system, as with the old one, those who contracted out will get less state pension than those who didn’t.
Millions of workers will also start to pay higher National Insurance as the end of contracting out in final salary schemes means they now pay.
If you were contracted out but carry on working for a number of years after 2016, making full-rate NI contributions, you can build up further state pension until you reach the full level of new state pension (£155.65).
What if I’ve been mainly contracted in?
The new rules mean that no-one will lose any additional state pension they've accrued by making full National Insurance contributions.
Whichever value is the highest, under the old or new system, that will be your starting amount. If this is more than the new maximum full level of state pension (£155.65), you’ll get the higher amount.
How can I build up my new state pension before I qualify?
Your new state pension will be based on your National Insurance (NI) record when you reach state pension age. You can increase what you’ll get by adding to your NI record before reaching this age:
- Keep paying NI – carry on working and paying NI contributions until you meet state pension age.
- Apply for NI credits – credits can fill gaps in your NI record.
- Pay voluntary NI contributions – you may be able to fill gaps in your NI record by paying voluntary contributions.
- Defer your state pension – build up your state pension by delaying taking it.
And if you qualified before April 2016, you can:
- Top up your state pension – pay for an increase in your state pension before March 2017.
New state pension - winners and losers
The average state pension payment under the previous system was £130 a week. Will those who qualify after April 2016 be better off under the new system? Some will - and others will be worse off.
The graphic shows the proportions of these, based on projections from the Department for Work and Pensions.
For example, in the period 2016-2020, some 51% of men who get the state pension for the first time will be better off, but 28% will be worse off (21% will get about the same - shown as amber).
New state pension winners
People in these groups will generally be better off under the new system:
- women, carers and the low paid who haven’t built up additional state pension
- self-employed people who didn’t qualify for state second pension
- people who were contracted out and can access their private pensions at age 55
- workers contracted out who have time to build up years of full National Insurance (NI) contributions
New state pension losers
These groups will generally be worse off, or no better off, under the new system:
- people with less than 10 years of NI qualifying years
- people with more than 35 years’ worth of full NI contributions
- high-earners who won’t be able to build up more additional state pension (ASP)
- younger employees who will no longer be able to build up ASP
- spouses, civil partners, widows and widowers who will no longer be able to claim or inherit a state pension based on a partner’s NI contributions
- those already drawing the state pension won’t be affected
What determines whether you're better off under the new state pension?
The new system will favour those with lots of qualifying years or credits, but little additional state pension, in the early period.
People in their 50s and 60s will be the main beneficiaries, with 75% of those qualifying for the state pension set to gain in the first 15 years.
Some 3m women will receive an average of £11 more per week by 2030 as a result of the changes.
The longer-term the situation will change, with the majority of younger workers in their 20s, 30s and early 40s being worse off.
DWP figures show that 53% of current 43-year-olds will get a lower state pension when they qualify for it in 2040, rising to 76% for 24-year-olds who are due to reach state pension age in 2060.
The overall bill for the government will reduce to combat the fact that the population is ageing. More people will gradually get less under the flat-rate system compared to what they’d have got under the current rules.
When can I claim state pension?
You can claim state pension when you reach state pension age. For men this is currently 65. For women, state pension age has started to rise, from 60 in 2010 to 65 in November 2018. Use our state pension age calculator to find out when you'll receive it.
From December 2018 state pension age will rise for both men and women, until it reaches 66 in October 2020 and 67 between 2026 and 2028. After this, the state pension age will be linked to longevity, and will be reviewed every five years.
If you live in the UK, you won’t receive your state pension automatically when you reach state pension age. You’ll get a letter four months before you retire, which will detail how you can claim.
There are three ways you can claim your state pension:
- Over the phone, by calling the State Pension claim line (0800 731 7898).
- Online, by registering with Government Gateway via the Department for Work and Pensions website (it takes about seven days for your Government Gateway user ID and activation code to arrive in the post).
- By downloading the State Pension claim form and sending it to your local pension centre. You can find this form on the Government’s website.
Are you eligible? How do I qualify for the state pension? - read our guide to eligibility
State pension statement
You can currently get a state pension statement from the Department for Work and Pensions (DWP) to find out how much state pension you may get and the number of qualifying years on your National Insurance record.
The forecast gives you an estimate of what you can expect in terms of your state pension based on your National Insurance contributions.
To get a statement, call 0345 3000 168, go to gov.uk/state-pension-statement, or write to The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98 1LU.
Topping up the state pension
Those retiring before the flat-rate state pension starts in April 2016 can get additional state pension by paying so-called Class 3A voluntary National Insurance contributions between October 2015 and April 2017.
You'll basically be swapping a cash lump sum for a boost to your weekly state pension. The government is offering any men born before 6 April 1951 and women born before 6 April 1953 a time-limited opportunity to buy more state pension.
To increase your state pension by £1 per week will cost £890 if you are 65 years old. The maximum you can top up your pension by is £25 per week, which would cost £22,250 at age 65. The cost of topping up falls as your age increases, so for a 70 year old an extra £1 per week costs £779, for a 75 year old it’s £674 and for someone aged 80 it costs £544. Find out more via Gov.uk topping up your state pension.
Your state pension questions answered
The Which? Money Helpline offers independent one-to-one guidance on a range of topics including the state pension. If you're not a Which? member, and you'd like to get unlimited access to our Money Helpline experts, you can try Which? Money for two months for £1.
- Retirement and pensions - get to grips with getting the most from your retirement income
- How much money do I need to save in my pension? - setting income goals for retirement
- What's happening with the state pension in 2016? - the key changes outlined in detail
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