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How is the State Pension calculated?

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The full amount for the new State Pension is £175.20 per week. However, it’s worth noting that not everyone will be entitled to the full amount. The payment is usually paid out every four weeks to retirees, and goes automatically into your chosen bank account. You have to apply for the State Pension, however, and won’t be enrolled into the scheme automatically, so look out for a letter when you’re nearing State Pension age about how you can claim.

How is the State Pension calculated?

The State Pension and how much you will get depends entirely on how many years of National Insurance contributions you’ve made.

The Department for Work and Pensions (DWP) uses your National Insurance record before April 6, 2016, to work out your starting amount.

Under the old system, if you were employed it meant 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 allowance of Additional State Pension by April 2016, this might mean you have already earned a pension under the old system that’s worth more than the full amount of the New State Pension.

If this applies to you, you will get the full new State Pension amount and any surplus will be kept above this as a “protected payment”, which will increase with inflation.

After April 2016, you won’t have been building up any more State Pension under the old rules.

If your starting amount is equal to the full new pension, you will get the maximum amount of State Pension.

In some cases, your starting amount is lower than the full new State Pension.

This could be because you were contracted out of the Additional State Pension some time before April 6, 2016.

If you were, then you and your employer would have paid National Insurance at a lower rate than the full standard rate, and there could be a deduction from your starting amount to reflect this.

This can even happen in cases where claimants has 35 years of National Insurance contributions and credits, and because some were lower, it will not add up to give the full new State Pension.

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However, you can continue to build up your State Pension to the current maximum, which is £175.20 per week, until you reach the appropriate age.

You can do this even if you already have 35 years of National Insurance contributions or credits.

People will not be able to claim the full amount of State Pension without at least 35 years of contributions during their working life.

These don’t have to be consecutive years, and you may be able to pay voluntary contributions to fill any gaps in your NI record. 

If you have less than 35 years of NI contributions, you will get an amount of State Pension based on the number of years you have paid or been credited with contributions.

If you have less than 10 years of contributions, you won’t qualify for any State Pension.

However, the 10-year threshold period does not apply to certain women who paid married women and widow’s reduced-rate NI contributions.

If you have gained qualifying years in the European Economic area, Switzerland, or certain other bilateral countries that have a security agreement with the UK, these can be used to achieve the minimum period.

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