The State Pension
It’s been a busy few months here. Self-assessment has been completed for the keen-beans amongst you. We’ve made some alterations to our suppliers and back office processes. We’ve gone a through a small albeit widely-felt rebrand. The family and I did manage to get away for a much-needed trip to France for a week of sun, sea, drizzle, cheese and indigestion.
As Individuals, our access to many of this country’s state benefits depend on how much we are paid and more specifically how much we pay into the system via tax and National Insurance contributions. The main one, the entitlement to which we should ensure we protect, is the state pension. A quick one today, but qualification criteria is below.
Copies of these circulars are available on your SharePoint sites, or via the website.
THE UK STATE PENSION
1ST JULY 2019
A new state pension was introduced on 6th April 2016, a reform which was intended to make the system much neater. It has broadly split the populous into 4 tranches.
For those born after 6 April 1951 (men) or 6 April 1953 (women), you are entitled to a new state pension of up to £168.80 (this rises each year) per week once you reach the state pension age of 67. Your qualification depends on you having 10 years of sufficient contributions on your national insurance record. Sufficient contributions are currently deemed to equate to £166 per week (the National Insurance Primary Threshold) of employment/self-employment earnings. The 10 years do not need to be concurrent and your entitlement remains even if your national residency changes.
Pension amounts can be reduced if you also contributed to certain non-state pension schemes before 6th April 2016, known as ‘Contracted Out’ schemes. Whilst these schemes were perfectly legitimate (often used in the public sector), the worker and the scheme benefited by reduced National Insurance Contributions. The flipside to this being less payments into the system, and a potential impact on your state pension entitlement. You can check with your pension providers if your contributions pre April 2016 will impact your entitlement to the state pension.
There may be circumstances where you qualify when not in work but there are a number of factors to consider – please call me if this applies and you would like to discuss.
For those born after 1951 / 1953 for men / women respectively but did not have a national insurance record prior to 6th April 2016, all of the rules above apply. However, the number of qualifying years rises to 35 rather than 10.
For those born before 1951 / 1953 for men / women respectively you are entitled the basic state pension of £129.20 per week and this amount increases each year in line with the higher of 3 government indices, as with the New State Pension. This depends on the pensioner having 30 qualfying years on their national insurance record.
For those born before 1945 / 1950 respectively you are entitled to the basic state pension, however the qualifying years are 44 and 39 with the minimum number of years needed for any pension being 11 and 10 for men and women respectively.
In addition to this, individuals claiming the basic state pension (not the new state pension i.e. those born pre 1953) will automatically qualify for the Additional State Pension. This was made of 3 schemes which ran consecutively from 1978. Therefore, there is no fixed amount and depends on which schemes you paid into, how many years you were in work since 1978, and how much was earned. For those benefiting from this pension, who would like me to independently validate their income, please give me a call.
There are additional rules in place to assist married, widowed or divorced pensioners, and those who have legally changed their gender.
If you wish to check what your current entitlement is, please use the link here.
If you would like discuss anything around state pensions please let me know.