The new state pension is now in effect, which means anyone retiring after 6th April 2016 will no longer receive a second state pension.
The current basic state pension pays pensioners £120 a week. For the new basic state pension, it will be £155 a week.
People who have retired before 6th April 2016 will continue on the old two-tier system, receiving the basic state pension and top ups including pension credit (for low incomes) and payments from the second state pension, if you qualify.
Men born after 6th April 1951 and women born after 6th April 1953 will be eligible for the new state pension.
Previously, there was no minimum to how many years of National Insurance contributions (NICs) you required to be eligible for a state pension. The new system requires you to have made at least 10 years of NICs. Age UK estimates that around 70,000 people will now no longer qualify for the state pension. Some parents, carers and jobseekers will have special exemptions. Each year of NICs will add £4.44 a week to your pension.
Am I eligible for a full state pension under the new plan?
To be eligible for the full new state pension, you will need 35 years of NICs, five years more than with the old system. The Government estimates that only 45% of pensioners will receive the full amount.
Does everyone receive £155?
No. Public sector workers – NHS employees, police officers, members of the armed forces and teachers in particular – who contracted out of the second state pension before 6th April 2016 will receive a reduced state pension.
Was I contracted out?
Find an old payslip and look out for the letters ‘D’ or ‘N’ on the National Insurance line – either of these means you were contracted out. If the letter is ‘A’, you were not contracted out. From 6th April 2016, no-one will be contracted out.
Who benefits? Who loses out?
Younger people because they will pay standard NICs, yet won’t qualify for the second state pension. The Pensions Policy Institute calculates that three quarters of people now in their 20s will lose out on £19,000 over the duration of their retirement. Two-thirds of people in their 30s will lose £17,000,
The remaining people in their 20s and 30s, around 4.6 million Britons, will gain on average £10,000 in the long term. Low paid women and the self-employed are also set to benefit.
Over the first 15 years of the new state pension, the Government estimates that three quarters of those reaching state pension age will get a higher pay out than if they had stayed with the old system.
Calculate your state pension age at https://www.gov.uk/state-pension-age