State Pension (United Kingdom)


The State Pension is part of the United Kingdom Government's pension arrangements. Benefits vary depending on the age of the individual and their contribution record. Anyone can make a claim, provided they have a minimum number of qualifying years of contributions.

Background

Basic State Pension

The basic State Pension is payable to men born before 6 April 1951, and to women born before 6 April 1953.
The maximum amount payable is £134.25 a week.

New State Pension

The new State Pension is payable to men born on or after 6 April 1951, and to women born on or after 6 April 1953.
The maximum amount payable is £175.20 a week.

Contribution record

The State Pension is a 'contribution-based' benefit, and depends on an individual's National Insurance contribution history. To qualify for a full pension, an individual would require:
A smaller, pro-rata, pension is paid to someone with fewer qualifying years. People who were contracted-out paid lower NI contributions and will receive a lower state pension.

Pension uprating

The Basic State Pension is increased in April each year to pensioners living in the UK and in certain overseas countries which have a Social Security Agreement with the UK that includes British pension uprating, in line with the CPI. All state pensions for these pensions are protected by the "triple lock" guarantee introduced by the coalition government, meaning that the pension rises each year by either the annual price inflation, or average earnings growth, or a guaranteed 2.5% minimum, whichever is the greatest. Coming into effect each April, the uprating is based on the previous September's CPI inflation, along with the three-month average of weekly earnings starting in July of that year.
Pensioners living in other countries without a current agreement have their pensions frozen at the rate in effect on the date when they left the UK, or on the date when they applied for a pension, whichever is later.

State Pension age

Before the Pensions Act 1995, the state pension age had been 60 for women, and 65 for men. The Act changed this so that the women's pension age would be made equal with men, but that the transition should only phased in from 2010 to 2020. In 2006, a cross party Parliamentary report again recommended equalisation of ages on the basis of equal treatment of both sexes. It also recommended a rise in the state pension age for both men and women to 68 between 2024 and 2046. The rationale for the age rise was that people would be living longer in the future. This was put into effect by the Pensions Act 2007.
However, when the Conservative and Liberal-Democrat coalition took power, the Pensions Act 2011 cut pension rights by accelerating the rise of the state pension age to 66 for both men and women by 6 October 2020. Under the Pensions Act 2014, the coalition government again cut pension rights and accelerated the rise in the state pension age to 67 by 6 April 2028.
In May 2019, a challenge in the High Court failed to reverse decisions to accelerate the equalisation of the pension ages on the ground that not enough notice was given. The Conservative Party in its 2019 Manifesto has said it will not change the rules, while the Labour Party has committed to compensating women who were unfairly affected by the changes in the pension age.
The current ages for the state pension in law are as follows:

Women born between 1947 and 1953

! colspan=3 align=center | date of birth from !! to !! date of reaching SPA

Men and women born after 5 Dec 1953

Deferral

It is possible to defer claiming a State Pension at SPA.
For individuals who reached SPA before 6 April 2016, deferred pensions are increased by 1% for every 5 weeks that the pension is not claimed. Alternatively pensioners who have deferred their pension can claim a lump sum and an unenhanced pension. The lump sum is the amount of pension payments foregone plus interest at 2% per year over the Bank of England base rate.
For individuals who reach SPA on or after 6 April 2016, deferred pensions are increased by 1% for every 9 weeks that the pension is not claimed.

Calculations

The basic State Pension is based on the National Insurance record of the individual. Each year that National Insurance was paid is called a qualifying year. For 2012–2013 to be a qualifying year you need to earn at least £5564 if you are an employee, or £5595 if you are self-employed, and have paid National Insurance contributions based on these earnings.
Men born after 5 April 1945 and women born after 5 April 1950 need 30 qualifying years for a full Basic State Pension, with a single qualifying year required to get any State Pension. Men born before 6 April 1945 needed 44 qualifying years for a full basic State Pension, and women born before 6 April 1950 needed 39 years; to get any State Pension, an individual needed 25 per cent of the qualifying years required for a full pension.
Since April 6, 2016, 35 qualifying years are needed to receive the full new state pension. State Pension amounts can be reduced if the pensioner was in a contracted-out works pension scheme.
Individuals with less than a full record of qualifying years, may elect to pay voluntary National Insurance contributions, in order to boost their record for pension purposes.
People in certain circumstances, such as caring for a severely disabled person for more than 20 hours a week or claiming unemployment or sickness benefits, can claim National Insurance credits.
The amount of the basic State Pension received is calculated by multiplying the full rate by the number of qualifying years and dividing by the number of years needed for the full rate.
NI contributions paid between April 1961 and April 1975 result in an entitlement to a small Graduated Retirement pension.
NI contributions paid between April 1978 and April 2002 result in an entitlement to an additional pension from the State Earnings Related Pension Scheme, although this will be very small if the individual was "contracted out" of this arrangement. Since April 2002 NI contributions have earned an additional State Second Pension.

Married couples

A wife or husband can claim extra basic State Pension based on the National Insurance contributions paid by his or her husband or wife.
If a woman has a Category A basic State Pension of less than 60 per cent of the full basic State Pension, then when she reaches her State Pension Age, she will have her basic State Pension topped-up to 60 per cent of her husband's Category A basic State Pension, once her husband reaches pension age.
Men, born after 5 April 1945, are able to claim a Category B pension based on their wives' contribution record. Similarly, civil partners who reach State Pension Age on or after 6 April 2010 are able to claim a Category B pension on the same basis.

Top-up pensions

Married women with young children and carers can claim credits of National Insurance contributions.
Pensioners with low incomes can claim Pension Credit.
An 'age addition' of 25p a week is paid to people over 80.

Pensions Act 2007

A new approach was introduced following the findings of the all-party Pension Commission in 2006 and the white paper Security in retirement: towards a new pension system published in May 2006. The key provisions were:
  1. Reduction of the qualifying years for a full basic State Pension from 44 years for men and 39 years for women to 30 years for both.
  2. The basic State Pension's yearly increase is determined by a rule known as the “triple lock”, it being the greatest of:
  3. #the growth in national average earnings;
  4. #the growth in retail prices as measured by the Consumer Price Index;
  5. #2.5 per cent.
  6. The contribution conditions for basic State Pension were changed so that it is easier for everyone to build up some entitlement.
  7. Replacing Home Responsibility Protection with a new system of weekly credits for parents and carers.
  8. Raising the State Pension age for both women and men from 65 to 68 in three stages between 2024 and 2046.
  9. Introducing National Insurance credits for parents and carers so that they can build up some entitlement to the Additional State Pension.
  10. End of the option to contract out of the Additional State Pension through money-purchase private pensions.
Some modifications to this were made in the Pensions Act 2008.

Future flat-rate state pensions

The Government originally proposed that in April 2017 the Basic and Second State Pensions should both be replaced by a single, flat-rate pension. A green paper was issued in April 2011, followed by a White Paper in January 2013. The amount of an individual's flat-rate pension would depend on the number of qualifying years, with 35 qualifying years being needed for the maximum pension and pro-rata amounts for fewer qualifying years, subject to a minimum of about 8 years. Rights already earned to a Second State Pension would not be lost. In the 2013 budget it was announced that introduction of the single tier pension will be brought forward by one year to 6 April 2016.
The new "single-tier" State Pension would be worth £144 a week. Provided they have 35 qualifying years, individuals would actually receive £144 a week, plus a "protected amount" if they have already earned a second State pension greater than £37 a week, and minus a "rebate-derived amount" if they have paid smaller National Insurance contributions because they were "contracted out" of the Second State Pension Scheme.
The new, single-tier State Pension would eventually remove the need for Pension Credit. It is also proposed that various rules regarding marriage, divorce and bereavement would be phased out. This would mean that Category B pensions would be replaced by Category A pensions for everyone, although any rights to a Category B pension that existed at the implementation date would be preserved.
These changes are now law, they were enacted by the Pensions Act 2014 which received royal assent on 14 May 2014
Chancellor Philip Hammond hinted the State Pension would no longer be ring-fenced from spending cuts after 2020 – raising for the first time the prospect of pensioners' benefits being cut as part of the government's austerity measures. Benefits for the elderly had been exempt from reductions and the chancellor confirmed during the Autumn Statement 2016 that the state pension would continue to rise until at least 2020.