There have been lots of changes to the state pension in recent years and it is important to stay up to date. The new state pension scheme was introduced in April 2016. Men born on or after 6 April 1951 and women born on or after 6 April 1953 now qualify for the new state pension, not the old one. Anyone who reached state pension age before 6 April 2016 falls under the old system – whether or not they have claimed their pension.
The state pension is paid every four weeks in arrears. Tax is never deducted from a state pension, but the amount paid is aggregated with any other income to establish if there is a tax liability and tax is often deducted from another pension through a tax coding.
As one of the changes in 2016, the state pension age increased for people after that date. The age for claiming depends when your state pension age falls. State pension age is due to increase as follows:
- Between December 2018 and October 2020: age 66
- Between 2026 and 2028: age 67
- Between 2044 and 2046: age 68
The government has announced plans to bring this timetable forward, which will see the increase to age 68 happen between 2037 and 2039.
The new state pension maximum is set at £164.35 per week in 2018/19 – and 35 qualifying years are required in order to obtain the full amount. Ten qualifying years are required to be entitled to any amount. A qualifying year is one in which an individual has made adequate National Insurance contributions.
An individual may have a gap in their National Insurance record for a number or reasons – perhaps if they have lived abroad for a period of time, were not working, or were employed on low earnings. A gap in a National Insurance record does not necessarily mean the person will not receive a full new state pension – as long as 35 qualifying years are accumulated by the time they reach state pension age, they will receive payment in full. However, if gaps in a record will prevent full payment, then the person could choose to make voluntary contributions to make up for these, although there are time limits for paying these.
Individuals can get an estimate of their state pension based on their current National Insurance contribution record and the assumption that they will continue to make contributions until they reach state pension age. This service is available online at gov.uk/check-state-pension.
A person can also increase the starting level of their state pension through deferment. The increase they gain from deferring depends on when they reach state pension age – before April 2016, the pension increase as a result of deferring was equivalent to 10.4 percent for every full year deferred. But anyone reaching state pension age after 6 April 2016 will only receive an increase equivalent to 5.8 percent for every full year.
You wouldn’t want to rely solely on the state pension in retirement, but it remains a valuable benefit; private or occupational provision alongside this is essential.