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The State Pension is a regular payment from the government which most people can claim when they reach State Pension Age.  However, not everyone receives the same amount.  How much you receive depends on your National Insurance record.  For many people, the State Pension is only part of their retirement income.  For example, you may also have money from a workplace pension, other pensions or earnings.

The State Pension changed on 6 April 2016, the old rules (which include basic State Pension and Additional State Pension) were complicated, making it difficult to know how much you would receive until you were closer to State Pension age.  With the new State Pension, you can be aware from a much younger age how much you are likely to receive, providing a solid base for saving and retirement planning.

The new State Pension is based on your National Insurance record.  If you have no National Insurance record before 6 April 2016 you will need 35 qualifying years to receive the full amount of new State Pension.  However, most of us will have made or been credited with, National Insurance contributions before 6 April 2016.  In most cases, the new State Pension will take into account your National Insurance record both before and after 6 April 2016.  The new rules ensure that the amount of State Pension you receive for your contributions prior to 6 April 2016 is no less, under the new State Pension, than you would have received under the old rules, provided you meet the 10-year minimum qualifying period.

For the new State Pension, you will normally need at least 10 ‘qualifying years’ on your National Insurance record to receive any State Pension.  These can be from before or after 6 April 2016, and they don’t have to be 10 years in a row.  Under the new State Pension, how much you receive will usually be based on your own National Insurance record only.

Not everyone will receive the full new State Pension amount, it will depend on your National Insurance record.  The full amount of the new State Pension is set at £179.60 a week (2021 to 2022 rate).  Some people will qualify for more than this and some will qualify for less, depending upon the number of qualifying years of National Insurance Contributions made prior to reaching state pension age, and under which state pension accrual scheme the contributions were made.  If you make the minimum of 10 years’ worth of contributions, the amount of State Pension paid is proportionate to your contributions.  For example, 10 years out of a 35-year maximum equates to 10/35^t of the maximum State Pension or around £51.31 per week.

For those closer to retirement age, it is best to request a State Pension Forecast from the ‘Department for Work and Pensions’ in order to receive the most accurate indication of what may be available.  You can check how much state pension you are due to receive through your personal tax account here: https://www.gov.uk/check-state-pension

It is possible to plug gaps in your National Insurance record by paying voluntary National Insurance Contributions.  This payment generally needs to be made within six years of the gap year, but there are various exceptions that extend the period.  You may also qualify for NI credits for some years if you were claiming state benefits, Child Benefit or were a foster carer.  The NI credits are not always applied automatically, so it is worth checking your own NIC record.  We can help you with this.

If you have already paid enough NIC to receive the full state pension you won’t be able to accrue any further income entitlement, so you may want to consider alternative retirement planning strategies such as investments or personal pensions.  For small business owners, you may be able to make personal pension contributions direct from your business or wish to make more generous pension contributions for employed family members to ensure they have the best retirement fund possible available when they reach retirement age.

If you would like advice on your existing pension, or to set up a new pension, we have a team of experts on hand to assist you.  Contact us or visit one of our offices in Dalston, Dumfries, Penrith or Workington.