Introduction to State Pensions

It’s not a matter of pipe dreams to start thinking about life after work – but unfortunately, it is essential. Whether you’re approaching the retirement milestone, or even if you are at the beginning of your career, it is critical that you plan ahead.

The State Pension is based on National Insurance (NI) contributions made during your working life, and is made up of ‘Basic State Pension’ and ‘Additional State Pension’.

Qualifying

A ‘basic’ pension will be received if you have built up enough ‘qualifying years' – the time in which you have been paying or been treated as paying National Insurance (NI) contributions. Men need to have contributed for 44 years to be entitled for a full basic State Pension, while women who reach 60 before 2010 need 39 years.

Between 2010 and 2020, the State Pension age for women will change, and the number of qualifying years will gradually increase to 44. This will not affect women born before 6 April 1950, who can still claim their State Pension at 60. But women born on or after 6 April 1955 will have a State Pension age of 65.

If you do not have the full number of qualifying years, you will still receive a percentage of the full basic State Pension. To be eligible for the minimum basic amount, you normally need 10 or 11 qualifying years.

Topping Up

If you have not made enough contributions, you may be able to bring them up to date. The Inland Revenue (www.inlandrevenue.gov.uk) can let you know if this is necessary, and is shortly expected to publish details of how it plans to inform customers of gaps in their National Insurance record covering all financial years since 1996-1997.

The latest deadline for making payments for gaps in your National Insurance account is six years after the end of the relevant financial year. This is except in the case of financial years 1996-1997 to 2000-2001, where the Inland Revenue is offering an extension of the deadline to April 5, 2008.

Claiming

You should be sent a State Pension claim form four months before you reach the retirement age. You may be asked about your background and to provide official documents to support information you give.

How much?

The full basic State Pension for the 2003-2004 financial year is £77.45 a week (or £4,027.40 per year) for a single person and £123.80 (or £6,437.60 per year) for a couple. It increases every year - but in line with prices, not wages - meaning its real buying power is reduced, because wage rises usually outstrip price increases.

A State Pension forecast is available if you want to calculate, in today's money, the amount you have already earned and what you can expect to have amassed by retirement age. It will also include details of your additional State Pension, if you have one. Contact the Retirement Pension Forecasting Team via www.thepensionservice.gov.uk.

 

Leave a Comment on this Article

	leave comment >