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State
Pension
Summary at February 2013
Most people will qualify for at least some state pension when they
retire. There are two main parts: a basic pension which nearly everyone gets;
and an additional pension (commonly known in the past as SERPS) that you
may be building up if you are an employee or if you cannot work because of
caring responsibilities or a long-term health condition.
The earliest you can claim your state pension
is
from state pension age. Currently this is 65
for men. For women, it is rising between April 2010 and November 2018 from
60 to 65. It will increase to 66 for both men and women by October 2020 and
then again to 67 between 2026 and 2028.
The government has also announced that it will link state pension
age to longevity. In other words, the longer we live for, the higher
state pension age will be. It will carry out a review of state pension age
every five years.
You build up the basic pension by
paying National Insurance
contributions while you are working. In some situations
- for example, if you are off work because of illness or unemployment - you
are credited as if you had paid contributions. Each year for which you have
enough National Insurance contributions or credits counts as a 'qualifying
year'.
If you have at least 30 qualifying years, this entitles you to the
full basic state pension (£107.45 a week in 2012-13). If you have
fewer than 30 years, you qualify for less.
The additional state pension is now called the State Second Pension
(S2P) but you might remember it by its earlier name, the State Earnings-Related
Pension Scheme (SERPS).
Employees build up additional pension while working unless they are 'contracted out'. Contracting out means you give up some additional pension and instead some of your National Insurance contributions are used to fund a pension from anoccupational pension scheme
or
a personal pension. To
learn more about contracting out, use the online tool on The Pensions Advisory
Service (TPAS) website
(www.pensionsadvisoryservice.org.uk).
Since it started in 1978, the additional state pension has been
earnings-related, so people on higher earnings build up more pension than
people on lower earnings. However, the additional pension is now gradually
shifting to become a flat-rate scheme so that eventually the full rate will
be the same standard amount for everyone. People caring for a child under
the age of 12 or for a person with a disability, and others claiming benefits
because they themselves have a long-term health problem are already credited
with a standard amount of additional pension.
Because contracting out is more popular with higher earners, the average
amount of additional pension currently payable tends to be low (£26
a week in 2010*).
To find out how much state pension you are
on track to get, you can order
a state
pension
statement through Gov.UK or
call 0845 3000
168.
Ways to increase your
state pension
Your basic state pension may be reduced if
you have gaps in your National Insurance contribution record that reduce
your qualifying years below the 30 needed. You may be able to fill gaps during
the last six years by opting to pay voluntary Class 3 contributions (which
cost £13.25 in 2012-13). For more information, see the HM Revenue &
Customs website
athttp://www.hmrc.gov.uk/payinghmrc/class3nics.htm.
You can also increase your state pension if
you do not start it straight away when you have reached state pension age.
This is
called deferring your state
pension.
The basic state pension and additional
state pension are being replaced with a single state pension payable
at a full rate of £144 a week. The government intends to implement the
changes in April 2017 at the earliest. For more details see the 8th March
2013 Telegraph article at
http://www.telegraph.co.uk/finance/personalfinance/pensions/9817508/New-state-pension-how-am-I-affected.html.
*Office for National Statistics, Pension Trends,
Chapter 5, October 2011.