State pension explained How much state pension will I get?

The state pension is a valuable foundation on which to build your retirement income, together with any workplace or personal pension provision you have. 

This guide explains how much state pension you'll get, and what's changing in 2016.

Video guide: What's happening with the state pension in 2016

In this video, Which? Money expert Gareth Shaw explains the key changes in 2016.

 

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Video transcript

After years of complaints about how complicated it is, the state pension is changing radically. In April 2016, in general the new system should be simpler and fairer but there are some catches you need to know about. Currently, the basic state pension is around 116 pounds a week. Some people get some additional state pension on top of this, as well.

The new state pension is still to be finalized but it should be about 151 pounds a week, although you could get more or less than this as we'll explain. It's worth knowing at the outset that you won't get any less than what you would have received under the old system. To get any state pension, you'll need at least 10 qualifying years on your national insurance record.

These are years when you've been either paying national insurance or receiving national insurance credits. You get credits for things like being too ill to work or being a carer or unemployed. The first change is that some women and carers are likely to be better off under the new system because their credits will count for more than they previously have.

Likewise, self employed people are likely to be better off under the new system because their contributions will count for more in the long run. The second change is the number of years you need to qualify for the full a 151 pounds a week is going up from 30 years to 35 years, although you can make out the difference with some additional state pension.

Additional State Pension sometimes called Second State Pension can also boost you to even more than a 151 pounds a week. But if you are opted out or contracted else is technically known of the second state pension so that you're paying less national insurance but getting a higher private pension, you're likely to have less than 151 pounds a week at the start but you can build up to that level through further contributions.

Say you have 20 qualifying years on your national insurance record come April 2016, with this you'll get 20/30 fits of the new state pension, which would give you a new state pension of 86 pounds 40 per week. If your aged over 55, you can call the department for working pensions to get an estimate of what you'll get.

If you reach state pension age before the 6th of April, 2016 the changes won't affect you. In April 2016 the pension will continue as it has before, the old system will apply even if you decide to defer or delay drawing your state pension. There's more about the pros and cons of differing your state pension and topping it up elsewhere in this guide.

So, there are three things that you can do right now. Read the rest of our guide to the state pension changes, work out when you qualify for the state pension by using the calculator in our guide, and call the Department for Work and Pensions to get an estimate of what you'll get. You can call them on 03453000168.

How much state pension will I get?

There are two parts to the state pension – the basic state pension, which almost everyone gets, and the additional state pension, which is only for employees. You qualify for the basic state pension by reaching state pension age and making 30 years' worth of National Insurance contributions.

Basic state pension

The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year).

If you’re married, and both you and your partner have built up state pension, you’ll get double this amount – so £231.90 a week. But if your partner has not built up their own state pension, they'll still be able to claim a state pension based on your record. 

If your income is below a certain level, you can boost it by claiming pension credit. This will take your income up to £151.20 a week for a single person and £230.85 a week for a couple (in 2015/16). 

Coming up to retirement? Income options for your pension under the 2015 rules - how recent pension freedoms could boost your funds

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.

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.

How much additional state pension will I get?

You may also qualify for the additional state pension, also known as State Earnings Related Pension Scheme (Serps) or state second pension (S2P). 

The additional pension is based on your earnings. The maximum you could claim in 2014/15 was £163 a week on top of your basic state pension - taking your total to £276.10 a week.

Most people opted, or 'contracted', out of the additional state pension at some point in their working lives. This second part of the state pension disappears in April 2016.

Find out more: State second pension and Serps - find out how much more you could get on your state pension

The new state pension

The amount of state pension you get will change for those qualifying for it on or after 6 April 2016. The basic and additional state pensions are going to be replaced by a flat-rate, single-tier state pension, with a full level of £155.65 in April 2016. 

People might get more or less than the indicated full new state pension (eg their starting amount). Those that have built up a certain amount of additional state pension will get a higher amount, while those that were contracted out before 6 April 2016 for a significant time will probably get less.

This figure will be whatever is higher – either the amount you would get under the old system or the amount you would get had the new system been in place over the whole of your working life.

The additional pension and 'contracting out' will be abolished, and so will part of pension credit. Qualifying National Insurance years will also increase from 30 to 35 years.

Find out more: What's happening to the state pension in 2016?

Pension winners and losers 403 pixels wide new

New state pension - winners and losers

The average state pension payment under the current system is £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 April 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

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