George Osborne today announced that the flat-rate state pension would start at £155.65 next year.
The figure unveiled today is the full level of state pension used to calculate how much people will get under the new system which begins on 6 April 2016.
How the new flat-rate state pension will work
The new flat-rate state pension system means that those who retire after 6 April will be given a ‘single-tier’ payment.
There will be no additional pension and no ‘contracting out’ – in the past people were able to opt out of the additional pension, with the government paying money into your workplace or private pension instead.
Everyone that has the required number of National Insurance qualifying years will eventually get the amount announced today. The number of qualifying years you need to get the full state pension will be going up from 30 to 35.
Many of those yet to retire will have contributed under the old system and the new system (with additional pension). If this applies to you, your entitlement amount will be worked out using a complex combination of the old and new rules.
For more: the new state pension
What it means for you
If you retire after 6 April, your ‘starting amount’ will be calculated based on your National Insurance record. No-one will get less than they would have done under the current state pension system.
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.
It has been estimated that two thirds of those currently working won’t actually get the headline amount announced today.
If you are already receiving your state pension, you’ll continue to receive it based on the current rules. The basic state pension will rise to £119.30 a week from April 2016.
The government is allowing you to top up your state pension if you qualify for it before 6 April 2016.
How state pension will be calculated from April 2016 onwards
Our graphic shows how your state pension will be calculated depending on whether you have a record of contracting in or out. If you’ve been contracted in, you’ll get whatever is higher:
- your basic state pension plus any additional state pension
- or the announced full level of new state pension (£155.65)
If you have contracted out, you will get the full level amount minus any money paid into your private pension. However, if you’re due less than the full state pension starting amount, you can build up more for every extra year you work from 2016 (even if you already have 35 qualifying years) until you reach state pension age.
How to find out how much you’ll get
To find out how much state pension you have built up so far and when you’ll get it, you can request a statement from the Department of Work and Pensions (DWP). A new service offering state pension statements based on the new rules was launched in October 2014, and is currently available to anyone over 55.
Those under 55 can only get a statement based on the current system, but in early 2016 the DWP will be launching a new online service for everyone.
This service will show your contributions to date, with an estimate of what you can expect to get at state pension age if you continue to contribute, as well as personalised information about what you can do to boost your state pension.