What is a pension? State pension
The basic state pension is a weekly payment from the government that you receive when you reach state pension age. To qualify for it, you must have paid or been credited with National Insurance Contributions (NICs) and have reached state pension age. The amount you can claim depends on your number of contributing years.
How much state pension do I get?
The amount you receive depends on your circumstances and when you qualified for the state pension. The basic state pension is £119.30 in 2016/17.
The amount of state pension you get changed in April 2016. The basic and additional state pensions were replaced by a flat-rate, single-tier state pension, with a full level of new state pension of £155.65.
People might get more or less than the indicated full new state pension (ie 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.
For more on this, visit our State pension guide.
You can top up your state pension with voluntary NICs if you have gaps in your record.
In April 2014, it was announced that those retiring before the flat-rate state pension started in April 2016 are able to gain additional state pension by paying so-called Class 3A voluntary National Insurance contributions between October 2015 and April 2017.
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.
Who’s eligible for state pension?
The number of qualifying years of NICs you need to get a full state pension increased from 30 to 35 years in April 2016. If you don't have enough qualifying years, you can pay voluntary contributions.
You may not have enough qualifying years because of gaps in your record. These can be caused by unemployment, being ill and not working, taking time off work for childcare or living abroad. Our guide to Retiring abroad has more details.
When can I claim state pension?
The age at which you can claim is currently 65 for men and 63 for women. By 2018 the state pension age for all women will be 65.
By 2020 it will be 66 for both genders, and it's due to become 67 by 2028. After that, the state pension age is set to be linked to longevity.
State second pension (S2P) and contracting out
If you're employed, you might also have built up some second state pension (S2P), previously known as Serps. This additional state pension was based on your NICs, and how much you could claim in S2P depended on your earnings – it wasn't a fixed amount, like the state pension.
You will have received the state second pension automatically, unless you’ve been contracted out of it. Contracting out finished in 2012 and the second state pension disappeared in 2016 when the system moved to a single-tier system, but it will still be used to calculate your starting state pension amount.
What is pension credit?
Pension credit makes sure that people over the state pension age have a minimum income. It's split into savings credit and guarantee credit. Savings credit is worth £13.07 a week per person, and guarantee credit tops up your basic state pension to £155.60 a week. Those qualifying for the state pension after 6 April 2016 will not be eligible for the savings credit element of the pension credit.
Child benefit and state pension
If you decide to take time off work to raise a young family, you can claim child benefit up until your youngest child's twelfth birthday. During this time, you will get National Insurance credits. If you’re working and claiming child benefit, you could end up building up more NICs than you need. You can transfer these to your partner. For more on benefits, visit our guide, Tax reliefs.
- What's happening with the state pension in 2016 - the flat-rate state pension
- How much money will I need in retirement? - find out more about your retirement income
- The Which? Money Helpline - get expert advice on your state pension entitlements
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