The State Pension – rules and changes explained
The State Pension changed on 6 April 2016. If you reach State Pension age on or after that date you’ll get the new State Pension under the new rules.
The new State Pension is designed to be simpler than the old system, but there are some complicated changeover arrangements which you need to know about if you’ve already made contributions under the old system.
- Am I affected by the change?
- Key changes to the state pension
- How is the new state pension calculated?
- What if you have less than 35 years of NI?
- Deferring the new State Pension
- New State Pension if you paid married women’s and widow’s reduced rate NI contributions
- Topping up your State Pension
- Getting a State Pension statement
Am I affected by the change?
I’m already getting a State Pension
No. You’ll continue to receive your State Pension under the old rules. But you may be able to top up your State Pension see below.
I’m a woman born before 6 April 1953 or a man born before 6 April 1951
No. Your State Pension will be paid under the old system. Even if you deferred your State Pension to a date after 6 April 2016, it will still be calculated under the old system.
I’m a woman born on or after 6 April 1953 or a man born on or after 6 April 1951
Yes. You’ll get the new State Pension. If you’ve already started to build up State Pension under the old system, this will be converted into an amount under the new State Pension.
If you hadn’t built up any State Pension by 6 April 2016, your State Pension will be completely calculated under the new rules.
Key changes to the State Pension
The earnings-related part of the old system which applied to employed people, called the Additional State Pension is abolished.
The new State Pension is based on your National Insurance (NI) record alone. For the current tax year 2016/2017 the new state pension is £155.65 per week – however you may get more than this if you have built up entitlement to additional state pension under the old system – or less than this if you were ‘contracted out’ of the additional state pension.
To be eligible for the full £155.65 per week you will need 35 years NI record.
How is the new State Pension calculated?
Your NI record as at 6 April 2016 has been converted into a ‘starting amount’ under the new State Pension. This won’t be lower than the amount you would have received under the old system.
If your starting amount is higher than the full new State Pension
Under the old system, if you were employed (rather than self-employed) you paid Class 1 National Insurance which entitled you to the Basic State Pension and an Additional State Pension. The Additional State Pension was based on your earnings as well as the National Insurance contributions you had made or been credited with.
If you had built up substantial entitlement to Additional State Pension this might mean that you have already earned a pension under the old system which is worth more than £155.65 a week. If this applies to you, you will get the full new State Pension amount and you’ll also keep any amount above this as a ‘protected payment’ which will increase by inflation. However you won’t be able to build up any more State Pension.
If your starting amount is equal to the full new State Pension
You’ll get the full new State Pension amount. You won’t be able to build up any more State Pension.
If your starting amount is lower than the full new State Pension
This might be because you were ‘contracted out’ of the Additional State Pension. You can continue to build up your State Pension to the maximum (currently £155.65 per week) up until you reach State Pension age. You can find out more about contracting-out here.
You can do this even if you already have 35 years of NI contributions or credits.
What if you have less than 35 years of NI?
- To get the full amount, you’ll need to have 35 years worth of NI contributions or credits (known as qualifying years) during your working life. These don’t have to be consecutive years.
- If you have less than 35 years of NI contributions or credits, you’ll get an amount based on the number of years you have paid or been credited with NI.
- If you have less than 10 years, you won’t normally qualify for any State Pension.
- However, the 10 year minimum qualifying period does not apply to certain women who paid married women and widow’s reduced-rate National Insurance contributions. See below.
- If you have gained qualifying years in the European Economic Area, Switzerland (or certain bilateral countries which has a social security agreement with the UK), these can be used towards achieving the minimum qualifying period; however, the actual UK State Pension award will normally be based on just the UK qualifying years.
Deferring the new State Pension
You’ll still be able to defer taking your State Pension. For each year you defer, you’ll get just under a 5.8% increase in your State Pension (compared to 10.4% under the old system). You will no longer be able to take the deferred amount as a lump sum.
New State Pension if you paid married women’s and widow’s reduced rate NI contributions
The new State Pension is normally based on your own NI contributions alone, but you may be able to have your State Pension worked out using different rules that could give you a higher rate if you chose to pay married women and widow’s reduced-rate NI contributions (sometimes called “the married woman’s stamp”).
Find out more about the changes to claiming and inheriting State Pension from a spouse or civil partner on the GOV.UK website.
Topping up your State Pension
There are two schemes available to top up your State Pension. Which one to use depends on whether or not you have reached State Pension Age.
Class 3 Voluntary National Insurance Contributions
If you have not yet reached State Pension Age but are worried that you might not have enough NI record to qualify for State Pension (or to get the maximum amount), you can make Class 3 National Insurance contributions. These contributions are voluntary and allow people to fill gaps in their record to improve their basic State Pension entitlement.
State Pension Top Up Scheme
If you have already reached State Pension Age you can increase your State Pension and get a guaranteed extra income for life with the State Pension top up scheme.
You must be entitled for State Pension and have reached State Pension age before 6 April 2016 to be eligible for the scheme. Use the scheme to increase your State Pension by between £1 and £25 per week if you’re either:
- A man born before 6 April 1951
- A woman born before 6 April 1953
You’ll need to make a lump sum contribution between before 5 April 2017. Use the State Pension top up calculator to find out how much you’ll need to pay.
Email: email@example.com for more information about the State Pension top up and how to make a payment.
GOV.UK has a helpful calculator that gives you an estimate of the cost.
If you’re unsure whether topping up your State Pension is worth doing, you can talk to the Pensions Advisory Service (TPAS) who have a free telephone helpline. You can contact TPAS on 0300 123 1047.
Getting a State Pension statement
It’s a good idea to regularly request a State Pension statement so you can see how much State Pension you’ve built up so far.
You can apply for one online or by phone or post. You’ll find details about how to do this at GOV.UK.