The new state pension - what you need to know

The State Pension is to be replaced on 6th April 2016 with a new scheme. This will take the place of the current basic and additional pensions, which are considered too complicated. The government also wants to prevent the overall cost of pensions rising, so there will be winners and losers.

Those who qualify for the new scheme are men born on or after 6th April 1951 and women born on or after 6th April 1953. The government is gradually equalising the pension age for men and women, so this gap will eventually close. Equality may be a good thing, but as life expectancy rises, so will the age people will qualify for the State Pension. Therefore, as time goes on, everyone will have to work longer before retirement. If you have teenage kids and think they don’t do enough around the house, spare them a thought… they will probably be working until they are in their seventies. (The State Pension age will be reviewed every five years). 

At least £148.40 a week—the actual figure will be announced in the autumn. This is an increase, but there will be winners and losers as it is a flat rate, which is meant to be fairer.

In the past a couple could qualify for the State Pension jointly. Under the new rules each person will be assessed individually. This could be bad news for those who were relying on their partner’s past National Insurance (NI) contributions. Around 30,000 women may be worse off. However, if you have worked enough years you’ll qualify in your own right under the new scheme and so could receive more.

Under the current scheme, self-employed people receive less State Pension than employees. From 2016 they will get the same rate.

You will usually need to have at least 10 qualifying years (paying more than £155 each week) to get any money. If you worked for yourself and paid NI contributions, this would also count. To get the full State Pension, you would need at least 35 qualifying years.

If you were not always working, you may still be eligible for some pension. If you were unemployed, ill, disabled, or a carer (for example a parent caring for a child under 12 or someone who receives Carer’s Allowance), you can still receive credits. 

There are some other less obvious circumstances that might affect your pension contributions. For example, if you do jury service and don’t get paid by your employer (and some cases can go on for months!), you can apply for credits for that period. In the less likely event that you were on the other side of the dock, you could later claim credits if you were wrongly imprisoned!

In the first five years of the scheme, you can ask for an estimate of the pension you will receive at gov.uk/state-pension-statement. If it appears you may not get the full amount, you may be able to make voluntary NI contributions or check if you are able to claim credits.

HOW WE CAN HELP 

If you need expert advice or help and support with your pension and retirement planning from a trustworthy source, contact Unbiased today.