Massive changes to the state pension have come into operation. If clients reach state pension age after 5 April 2016 they will receive the ‘new state pension’.
The full amount is £155.65 per week (2016/17) and up until 2020, it’s guaranteed to increase by the highest of price inflation, earnings growth or 2.5%, known as the “triple lock”.
But, according to provider Aegon, not everyone will get the full new state pension as it depends on whether people have paid full rate National Insurance contributions for 35 years.
It explained due to complex transitional arrangements, some people may get an extra state pension on top of the new state pension.
Aegon head of pensions Kate Smtih said: “To improve your retirement income think about starting or increasing your private pension contributions. Building up private pension savings can help to bridge the gap to the state pension age, so you can stop working earlier.”
Ten top facts
1. Clients cannot receive their new state pension before state pension age. To check state pension age (SPA) visit the Gov.uk website.
- By November 2018 SPA equalises at age 65 for men and women
- By October 2020 SPA increases to age 66
2. Clients will have to claim their new state pension, it will not arrive automatically
- People will be sent a letter four months before your SPA telling them how to claim
- If clients have not heard anything when they are three months from SPA they should contact 0800 731 7898 or go online
3. People can check their National Insurance (NI) contributions
- People need ten qualifying years to get any new state pension
- The need 35 years paying the full rate to get the full new state pension
- Information is available from HMRC
4. Clients can ask for a new state pension statement
- People aged 50 or over you can request a new state pension statement
- Ring 0345 3000 168 or go online to the Gov.UK website
5. If clients have gaps in their NI contributions record, they should think about paying voluntary contributions to achieve the minimum of ten qualifying years or to maximise the new state pension.
- This has to be done before SPA
- National Insurance credits as a parent carer, for unemployment and sickness count towards the new state pension
6. Contracting out – clients may have been contracted out of the earnings-related part of the previous state pension system if they were in a workplace pension or saved in a personal pension, and paid lower NI contributions.
- This means they will not get the full new state pension, but their private pension will be increased
- Most earnings-related pension schemes, including public sector and local authority schemes were contracted out
7. Clients should be made aware that they cannot inherit their spouse’s or civil partner’s new state pension. In some circumstances they may be able to inherit an extra state pension if widowed.
8. If clients get divorced they will still keep then new state pension but may lose or gain an extra state pension.
9. People can increase the new state pension if they defer payment by at least nine weeks.
- The state pension increases by 1% for every nine weeks deferred
- That’s 5.8% for a full year
10. If clients are self-employed they will also be entitled to the new state pension based on Class 2 NI contribution records.
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