With only four weeks to go until the new state pension is introduced, Which? highlights how you can increase your starting amount if you qualify under the new system.
The new state pension – how it will work
Those reaching state pension age on or after 6 April 2016 will be covered under the new state pension system.
The idea is to replace the current system of basic and additional state pensions with a more straightforward single pension amount.
At the outset of the new system, your ‘starting amount’ is calculated. This compares the amount of state pension you would have received under the old rules with the amount you’ll get under the new state pension rules, based on your National Insurance record as of 6 April 2016. The higher of these figures will form your starting amount for the new state pension.
People qualifying for the state pension before 6 April 2016 will continue to receive it under the old rules. You can still top up your state pension until April 2017.
Find out more: State pension explained – all you need to know about the new rules
How to increase your state pension starting amount
There are four main ways in which you might be able to increase your starting amount under the new state pension system.
1. Make further National Insurance contributions
People working past 6 April 2016 who continue to pay National Insurance (NI) contributions will be able to add to their starting amount. For each further year of NI contributions, you’ll get an extra couple of pounds per week as part of your state pension.
This can carry on until you reach state pension age or until you have attained the full amount of new state pension (£155.65 in 2016/17).
Find out more: National Insurance contributions – learn more about these payments
2. Claim National Insurance credits
The new state pension will partially be calculated according to your National Insurance record (up to a maximum of 35 NI qualifying years).
You can increase the amount you get when you reach state pension age by filling any gaps in your NI record via National Insurance credits.
You can get credits through:
- caring for one or more disabled people, for at least 20 hours per week
- receiving benefits, such as Jobseeker’s Allowance, Employment and Support Allowance or Carer’s Allowance
- caring for a grandchild or other family member under the age of 12.
Find out more: National Insurance credits – how the system works
3. Delay taking your state pension
Under the new system, you can still defer taking your state pension in order to get a higher amount when you do start taking it, although it’s a less attractive option than under the old system.
If you qualify for the state pension on or after 6 April and defer, your state pension will increase by 1% for every nine weeks you put off claiming, or 5.8% a year.
If you hit state pension age before 6 April 2016, your deferred state pension will be calculated under the old, more generous rate of 10.4% a year.
Find out more: Deferring your state pension – we weigh up the pros and cons
4. Make voluntary contributions
You may have gaps in your NI record if you have not paid or been treated as having paid NI contributions, or if you’re not eligible for a NI credit for a particular tax year.
In order to fill these gaps, you can make voluntary contributions.
Find out more: Voluntary National Insurance contributions – information from gov.uk