What will my state pension be?

The state pension changed in 2016 in an attempt by the government to simplify the whole system and create a level playing field. While this might have positive outcomes, there are some caveats you should familiarise yourselves with to avoid any potential pitfalls later in life.

What is a state pension?

A state pension is a weekly payment you receive from the government once you’ve reached state pension age. To get a state pension, you must have been making National Insurance contributions (NICs) or receiving National Insurance (NI) credits for at least a set number of years. The state pension is available to everyone who meets the criteria and is used as a source of income by retired people, alongside any workplace or private pensions they have paid into during their career.

What is the new state pension?

If you retired after the new state pension came into effect, the maximum amount you receive for the basic state pension will go up to £159.55 per week.

There are some exceptions that could see you take home more than that amount, or in some cases, less. This will depend on your NICs or NI credits.

How does national insurance affect your state pension?

To qualify for any state pension, you must have at least ten qualifying years of NI payments.

That means you would need to have been making NICs, or receiving NI tax credits over that period. This hasn’t changed from the old system to the new.

To receive the new full state pension, you now need 35 qualifying years on your national insurance – this is up from 30 years under the old system.

How is my pension affected if I’ve already retired?

First of all, the changes to the new state pension have no bearing on any workplace or private pension you may have set up.

As of April 6th 2016, if you’ve already retired you’ll continue with the old system – that’s a basic state pension of £119.30 per week. But that doesn’t include any additional state pension you might have been receiving on top of that.

As state pension age isn’t the same for men and women, there are some things to note as the new state pension may apply differently to you.

• For men born before the 6th April 1951, and women before 6 April 1953, your pension will be paid under the old system.
• If you’re a man born after the 6th April 1951 or a woman born after the 6th April 1953, you’ll receive the new state pension.

You can check your individual state pension age with this online tool.

How to calculate your state pension

Let’s imagine that you’ll retire next year with 25 qualifying years on your NI. To work out how much your state pension will be you’d need to:

Divide £159.55 by 35 (years), multiply that by 25 (qualifying years), which would give you a state pension of £113.96 per week.

You can also check your state pension forecast by visiting gov.uk. You’ll need to have a Government Gateway account and verify your identity before you can access the forecast.

How to check your national insurance record

Even if you haven’t yet reached state pension qualifying age you can still check your current NI record online.

It’s a good idea to do this to see if you have any gaps in your credits or contributions and look at what options are available to you to make up for those gaps. For example, you can make voluntary national insurance contributions that top-up your number of qualifying years.