State Pensions

Basic State Pension

The State Pension is a contribution-based benefit that depends on an individual's National Insurance contribution history. It is increased in April each year to pensioners living in the UK and in certain overseas countries.

Qualifying Years

A qualifying year is a tax year where you have earned sufficient income to pay National Insurance Contributions. In the 2009/2010 tax year, you need to have £5,085 or more of such earnings if you are self-employed, or £4,950 or more if you are an employee.

Even though you have not always worked, you may still be able to receive credits for periods when you have been out of work, had long-term injuries, illnesses or been getting Carer’s Allowance because you are caring for someone who is seriously sick or disabled. For example, if you receive certain benefits like Carer's Allowance, Jobseeker's Allowance, Support Allowance or Incapacity Benefit, you will automatically receive National Insurance credits for the weeks you have been claiming.

The amount of State Pension you get depends on how many qualifying years of National Insurance you have. For someone with the 30 qualifying years, it is payable at a flat rate of £107.45 a week (2012/13). A smaller, pro-rata, pension is paid to someone with fewer qualifying years.

State Pension Age Limits

Currently, women usually need 39 qualifying years in order to get the full basic State Pension, whilst men normally need at least 44 years.

Normally you can receive your state pension at the state pension age. However, this depends on whether you are male or female, and in which year you were born.

For more specific information see the tables below:

State Pension Age for Women

Date of Birth                           State Pension Age

Before 5 April 1950                   60

6 April 1950 - 5 April 1951         60, rising to 61

6 April 1951 - 5 April 1952         61, rising to 62

6 April 1952 - 5 April 1953         62, rising to 63

6 April 1953 - 5 April 1954         63, rising to 64

6 April 1954 - 5 April 1955         64, rising to 65

6 April 1955 - 5 April 1959         65

6 April 1959 - 5 April 1960         65, rising to 66

6 April 1960 - 5 April 1968         66

6 April 1968 - 5 April 1969         66, rising to 67

6 April 1969 - 5 April 1977         67

6 April 1977 - 5 April 1978         67, rising to 68

After 6 April 1978                       68

 

State Pension Age for Men

Date of Birth                             State Pension Age

Before 5 April 1959                    65

6 April 1959 - 5 April 1960         65, rising to 66

6 April 1960 - 5 April 1968         66

6 April 1968 - 5 April 1969         66, rising to 67

6 April 1968 - 5 April 1977         67

6 April 1977 - 5 April 1978         67, rising to 68

After 6 April 1978                      68

Proposed changes to State Pension age

On 29 November 2011, The Government announced that it proposed to bring forward the rise in State Pension age to 67 for both men and women to 6 April 2028. This means that people born after 5 April 1961 but before 6 April 1969 will have a State Pension age of 67. People born after 5 April 1960 but before 6 April 1961 will reach State Pension age between 66 and 67.

State Second Pension (S2P)

The State Second Pension (S2P or also known as the Additional State Pension) is a government-administered pension that can be paid in addition to the Basic State Pension. It was introduced in the UK by the Labour Government on 6 April 2002, to replace the SERPS (State Earnings Related Pension Scheme). SERPS was based on a combination of the amount of your National Insurance contributions and how much you earned as an employee. As such, it only provided for employees of companies.

In April 2002, SERPS was reformed to give a more generous additional State Pension to low and moderate earners, and certain carers, people with a disability or long-term illness.

Eligibility and Amount of the State Second Pension

During any period that you fall into any of the following categories, you will not be able to build up your State Second Pension. These categories are:

  • If you are not working;
  • If you are self-employed;
  • If you earn less than a certain amount a year (£4,940 for 2009/2010);
  • If you earn more than £13,800 for 2009/2010, and have contracted out of the State Second Pension and instead pay into a personal pension;
  • If you earn more than £31,800 for 2009/2010, and have contracted out of the State Second Pension and instead pay into an occupational (company) pension.

The amount of State Second Pension you can receive depends on how much you earn during your working life, and the amount of your National Insurance contributions, and there is a maximum you may receive. This is a combination of both your own additional pension and any inherited additional pension. The maximum amount is revised each year and is applied at the date on which entitlement to the inherited additional pension first arises. The maximum additional State Pension between April 2012 and April 2013 is £161.94 each week.

In some circumstances, carers and people with disabilities and long-term illnesses can build up an State Second Pension even if they are not in work.

Changes to the State Second Pension

The Pensions Act 2007 and the Pensions Act (Northern Ireland) 2008 has made the following changes for people reaching State Pension age on or after 6 April 2010:

  1. From April 2010, if you care for children (up to the age of 12), are a foster carer or spend at least 20 hours a week caring for one or more disabled people, then you will build up entitlement to State Second Pension;
  2. From around 2012-2015, it is expected that the S2P will become a simple, 'flat-rate' weekly top-up to the basic State Pension, starting at around £1.60 a week for people earning the minimum amount. This added minimum amount will go up every year to keep its value;
  3. The current earnings-related element built up by people earning between £13,800 and £40,140 a year (in 2010/11) will be gradually withdrawn, so that people will build up entitlement on a completely flat-rate basis by approximately 2034.
  4. in order to gain a qualifying year for State Second Pension, you will be allowed to combine National Insurance contributions from earnings in part of a tax year with credits for other parts of the same year .

A widow, widower or surviving civil partner can only inherit a maximum of 50 per cent of their spouse's or civil partner's State Second Pension.

The Over 80 Pension

The Over 80 Pension is a non-contributory pension for people aged 80 or over, who have little or no State Pension. In 2009/10 applicants who did not receive a Basic State Pension could claim a maximum of £57.15 a week, but those who were on a reduced Basic State Pension, could claim the difference between their Basic State Pension and the maximum Over 80 Pension, which is set at about 65% of the Basic State Pension.

The Over 80 Pension is applicable if:

  1. You are aged 80 or over;
  2. You live in England, Wales or Scotland, and have done so for a total of 10 years or more in any continuous period of 20 years before or after your 80th birthday;
  3. You do not receive a full Basic State Pension because you have not paid enough National Insurance contributions. The amount you receive for your Basic State Pension must be less that the maximum payable by Over 80 Pension.

Pension Credit

Pension Credit was introduced in October 2003 to provide those aged 60 and over with a minimum level of income and to give extra money to those aged 65 and over with modest incomes, or who have made savings for their retirement. You can claim Pension Credit whether or not you are working.

The scheme has two parts:

  1. The Guarantee Credit;
  2. The Savings Credit.

It is possible to receive either component of Pension Credit exclusively or a combination of both.

Guarantee Credit

This part of the pension scheme is designed to guarantee a minimum income to those aged 60 and over, by topping up your weekly income to a minimum level - in 2011/12, a top up to £142.70 if you are single, and to £217.90 if you have a partner. However, if you have caring responsibility, you are severely disabled or have certain housing costs, you may receive more money.

The most basic rule to be eligible for Guarantee Credit is: you must have reached the Pension Credit qualifying age. Further changes to the State Pension age are likely to affect the Pension Credit qualifying age, which will gradually increase to 66 by 2020. To find out the date from which you qualify, see the table below.

Date of Birth                              Pension Credit Age

On or before 5 April 1950          60

6 April 1950 - 5 April 1951         60, rising to 61

6 April 1951 - 5 April 1952         61, rising to 62

6 April 1952 - 5 April 1953         62, rising to 63

6 April 1953 - 5 April 1954         63, rising to 64

6 April 1954 - 5 April 1955         64, rising to 65

6 April 1955 - 5 April 1959         65

 

While you must have reached the Guarantee Credit qualifying age, you can still claim the Guarantee Credit if your partner is under qualifying age. If you or your partner are both over the Guarantee Credit qualifying age either one of you can apply.

In this case 'Partner' is used to refer to:

  • Your wife;
  • Your husband;
  • Your civil partner;
  • The person you live with as if they were your husband, wife or civil partner.

Savings Credit

The Savings Credit is created to reward those who have attempted to make additional provision for their retirement over and above the Basic State Pension. It can be in the form of modest savings or an additional pension.

If you are currently aged 65 or over and living in the UK, you can be entitled to Savings Credit. However, from March 2019 this will gradually increase in line with the increase in State Pension age. You may get the Savings Credit on its own or with the Guarantee Credit.

The Savings Credit can be up to:

  • £18.54 a week if you are single;
  • £23.73 a week if you have a partner.

You can still get the Savings Credit if the money you have coming in is not more than:

  • £189 a week if you are single;
  • £277 a week if you have a partner.

These amounts possibly can be more if you are disabled, have caring responsibilities or certain housing costs, such as mortgage interest payments.

Income that is taken into account to estimate applicable Savings Credit includes:

  • Basic State Pension;
  • Occupational pensions;
  • Private pensions;
  • Working Tax Credit;
  • Most social security benefits, such as Carer's Allowance;
  • Earnings after tax and expenses from employment or self-employment (less half of any company or personal pension contribution you make);

An 'assumed income' of £1 a week for every £500 (or part of £500) of capital you have over £10,000 (investments, savings, property that is not your main home).

Income that is ignored includes:

  • War Widow/Widower's Pension (for pre-1973 widows);
  • Attendance Allowance;
  • Exceptionally Severe Disablement Allowance;
  • Christmas Bonus.

Claiming Your State Pension in the UK

Normally, you will receive a retirement pack from the Pension Service about 5 months before you reach State Pension age. This pack will contain a pension statement letting you know what you will receive and a BR1 claim form - you simply have to complete this form and return it to the Pension Service.

If you are eligible for a higher rate pension at age 80, you do not have to claim – it will be paid automatically.

If you do not want to claim your state pension you do not need to do anything - your state pension automatically will be deferred.

What Could You Do If You Do Not Receive a Retirement Pack?

If you do not receive this pack 3 months before your birthday, then you can download a BR1 form from the Pension Service website (www.thepensionservice.gov.uk), fill it in and return it to Pension Service, or you can make a claim over the phone (0800 731 7898).

To claim your state pension over the phone, you will need the following information:

  • Your Tax reference number;
  • Your National Insurance (NI) number;
  • Your date of marriage or formation of civil partnership;
  • Your spouse or civil partner's National Insurance (NI) number;
  • Your employers name and address along with your payroll, staff number and date you stopped working;
  • Details of the bank you want your payments paid into (sort code and account number);
  • Details of other benefits either you or your spouse ( or civil partner) are receiving with the benefit reference number if known.

Your State Pension can be paid directly into your bank, building society, or any other account that accepts Direct Debit payment.

What Happens if You Forget to Claim?

If you have forgotten to claim your state pension, you may be able to backdate it for a maximum of one year. After claiming, you will be sent details on how your state pension has been calculated and what to do in the situation if you do not agree with how it was calculated.

If you are claiming an increase for a dependant, the maximum period it can be backdated is only 3 months.

Claiming a State Pension When Living Abroad

If you are planning to temporarily or permanently live abroad when you retire (or if you are doing that already), you can still claim your State Pension. If you move to the European Economic Area (EEA) or Switzerland, then you will be entitled to receive yearly index-linked increases. If it is a country outside this area, you will still be able to claim your State Pension, but you won't be entitled to the yearly index-linked increases. However, if you return to live in the UK, your State Pension will be increased to current levels.

How the State Pension Will Be Paid in This Situation?

Your State Pension can be paid directly into a bank or building society account in the UK, or directly to a bank in the country in which you live. Payments can be made in the local currency of the country in which the bank account is held, or by cheque in sterling pounds sent to you or the bank every 4 or 13 weeks.

List of countries in the European Economic Area (EEA):

  •     Austria
  •     Belgium
  •     Bulgaria
  •     Czech Republic
  •     Cyprus
  •     Denmark
  •     Estonia
  •     Finland
  •     France
  •     Germany
  •     Gibraltar
  •     Greece
  •     Hungary
  •     Iceland
  •     Ireland
  •     Italy
  •     Latvia
  •     Liechtenstein
  •     Lithuania
  •     Luxembourg
  •     Malta
  •     Netherlands
  •     Norway
  •     Poland
  •     Portugal
  •     Romania
  •     Slovakia
  •     Slovenia
  •     Spain
  •     Sweden

List of Countries with whom the UK has Reciprocal Security Agreements with:

  •     Barbados
  •     Bermuda
  •     Bosnia-Herzegovina
  •     Croatia
  •     Israel
  •     Jamaica
  •     Jersey and Guernsey
  •     Isle of Man
  •     Mauritius
  •     Montenegro
  •     Philippines
  •     Republic of Macedonia
  •     Serbia
  •     Turkey
  •     USA

Deferring Your State Pension

It is not obligatory to claim your State Pension as soon as you reach your State Pension Age - you can choose to defer it to enable you receive a higher weekly amount, or the option of a one-off taxable lump-sum payment instead.

How to Defer a State Pension?

If you have not yet claimed your State Pension, you do not need to do anything in order to make a deferral (just by not making the claim), your State Pension will automatically be deferred. However, if you are already claiming another social security benefit, then you will have to let the Pension Service know that you want to defer your pension. In case you are already receiving your State Pension and you decide that you want to defer it, you can stop claiming it at any time by contacting your local pension centre.

Pension Deferral Options

  1. Extra State Pension

If you defer your State Pension for a minimum of 5 weeks, you can earn an increase to your State Pension of 1% for every 5 weeks you put off claiming, which equals to 10.4% extra for each year you defer.  For example, if your State Pension was £200 a week and you decided to delay drawing it for 4 years, the pension you would receive when you retire would be £283.20 a week.

  1. Lump Sum Payment

If you defer your State Pension for a minimum of 12 consecutive months, you can choose to receive your State Pension paid at the normal rate, but with a one-off lump sum payment. The lump sum will equal the amount of pension you would have received plus interest. The rate of interest used equates to 2% above the Bank of England base rate. The lump sum is ignored for Pension Credit, Housing Benefit or Council Tax Benefit, and it is subject to tax, although you will not pay a higher rate on the lump sum than you will pay on other income you receive in the tax year the lump sum is paid.

Taxation & Inherited Pensions

When you die, your surviving spouse (or civil partner) or family in some cases may be entitled to part of your State Pension benefits:

Basic State Pension

Your basic State Pension is paid only to you, and cannot be passed on to anyone else when you die.

Additional State Pension

If you have an Additional State Pension, then your spouse or civil partner can inherit some of this additional pension. The amount they receive depends on when you were born:

  • If you are a man born on or before 5 October 1937 you will receive full amount (100%) of your spouse’s (partner’s) or family member’s additional state pension. If you are born between 6 October 1937 and 5 October 1945, you will receive 60-90% of this pension (depending on your exact date of birth). But in case you are born after 6 October 1945, you will receive only 50% of you spouse’s (partner’s) or family member’s additional state pension

  •  If you are a woman born on or before 5 October 1942 you will receive full amount (100%) of your spouse’s (partner’s) or family member’s additional state pension. If you are born between 6 October 1942 and 5 July 1950, you will receive 60-90% of this pension (depending on your exact date of birth). But in case you are born after 6 July 1950, you will receive only 50% of you spouse’s (partner’s) or family member’s additional state pension.

Deferred Pension

  1. In case you die before you start to claim your Deferred Pension, it may be added to your spouse's or civil partner's State Pension. You can benefit from your spouse’s or civil partner's deferred State Pension when you reach State Pension age, as long as you have not re-married or registered again as a civil partner.
  1. In case you chose a lump-sum payment rather than the extra state pension, any amount you still have left after your death will form part of your estate.
  1. In case you die after you start to claim your Deferred Pension, your spouse's or civil partner's own State Pension payments will be increased. For any basic State Pension you have deferred, your spouse or civil partner will be entitled to the exact same amount as you would have received.
  1. In case you do not have spouse or civil partner, the State Pension you deferred after your death becomes part of your estate, and your next of kin can claim an amount equal to the first 3 months of extra state pension payments.