What the new state pension changes mean to you

What the new state pension changes mean to you

If you’re retired already or are thinking of retiring soon, you might be interested in knowing exactly how the recent changes to the state pension will affect you. On the whole, it’s good news as the amount you’ll get has gone up, but there are caveats, as you might expect.

First, the good news

As part of what’s known as the ‘triple lock’, the state pension is set to increase, whether you get the new state pension or the old basic state pension. So, let’s look at the figures.

The new state pension, which started in 2016, will rise by 2.5% to £179.58 per week. This works out as £4.40 per week or £228.80 per year. For the basic state pension, the increase will be £3.40 per week (£176.80 per year). Both increases will start from 12 April 2021.

So, what’s the bad news?

To qualify for the maximum new state pension amount stated above, you’ll need to have 35 years’ worth of National Insurance contributions (NICs) accrued over your working life. They don’t have to be consecutive, so it doesn’t matter if there’s a few gaps here and there. If you don’t have the full 35 years’ worth, you’ll receive reduced monthly payments.  And if you don’t have at least 10 years’ worth recorded, you won’t get anything at all, in most cases.

However, you can make voluntary payments to top up your contributions if you need to. But if you make more than 35 years’ worth of contributions, it won’t make any difference to the amount of your state pension.

To check if you need to make any additional NICs, visit the gov.uk website. You can do this as many times as you like.

Working out which pension you qualify for

If you’re a male born before 6 April 1951 or a female born before 6 April 1953, you’ll receive, or already be receiving, the basic state pension. If you’re born after either of those dates, you’ll get the new state pension.

When you can claim your state pension also depends on when you born. Again, you can check gov.uk to see the date when you’ll reach state pension age.

Could you defer your state pension?

You don’t have to take your state pension as soon as you reach the qualifying age. For each year you delay, you’ll get a 5.8% increase in your pension amount. This will be added to your monthly pension payments as you can’t take it as a lump sum. So, if you’ve got a private pension scheme you’re planning to take earlier than your state pension age, or are thinking about working for a bit longer, it might be worth doing the sums to see if you can afford to delay things.

Pension credits

On the other hand, you might be eligible to claim pension credits if you don’t currently get the full state pension. This benefit depends on your income and some other factors, and you’ll need to have reached state pension age by 6 April 2016 to make a claim.

Want some help with pensions?

We’re always happy to chat with you about pensions or any other financial advice you need. Please get in touch to get things started.