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Retirement Pensions - What to Expect.
State Pensions

Part 2 - The State Pension

Almost everyone will receive a state pension. For men born before 6 December 1953, the current State Pension age is 65.

For women born after 5 April 1950 but before 6 December 1953, their State Pension age is between 60 and 65.Under the Pensions Act 2011 women’s State Pension age will increase to 65 between April 2016 and November 2018. From December 2018 the State Pension age for both men and women will start to increase to reach 66 in October 2020.

For more details on this, go to

Direct Gov - State Pensions Calculator.

 

Retirement Pensions - What to Expect. Links

 

In April 2016 the state pension system changed and became a single-tier pension. That means that there is no longer any State Second Pension (S2P), formerly SERPS. To get the full state pension, you need to have 35 years National Insurance contributions. The basic state pension this year (2017/18) is £159.55, whether you are married or single. If you have fewer than 35 years’ contributions, you will get a proportion of the full amount. you will also need a minimum of 10 years' contributions to receive any state pension. You can see an overview of the State Pension scheme at: https://www.gov.uk/new-state-pension/overview

 

Key features of the single-tier pension

  • The full state pension for 201/18 is £159.55 per week
  • To get the full state pension you will need 35 years National Insurance (NI) contributions or credits. If you have fewer than 35 years but more than 10 years, you will receive a proportion of the maximum depending on the exact number of years contributions that you have.
  • As with the previous basic state pension, the law requires this to be up rated annually in line with earnings, but the aim is to increase it in line with the ‘triple lock’ that is the higher of earnings, prices as measured by the CPI, or 2.5%.
  • To qualify for any State Pension, people need a minimum of 10 years contributions
  • Contracting out has ended.
  • The state pension is now an individual entitlement, so there are no special rules for people who are married, bereaved or divorced.
  • Pension Credit and other means-tested benefits will continue to provide a safety net, but the savings credit element of Pension Credit has been abolished.

 

The transitional period

Although  everyone with at least 35 years of contributions will receive the full basic State Pension, it will take some time to move to this position. During the transitional period some people will receive a State Pension which is higher than £159.55 (2017/18) a week and some people will receive less.


Anyone who has already built up a NI record now has this translated into an amount described as a ‘foundation amount’.
If the 'foundation amount' is more than the level of the single-tier pension, any amount over £159.55 will be protected and paid in addition to the single-tier pension once an individual reaches reach State Pension age. If the 'foundation amount' is less than the £159.55, the person will receive less than this but no less than they would have received under the old system. This could be the case for people who have been contracted out of the additional State Pension and therefore paying lower NI contributions for many years.

Deferring your State Pension


You can defer your state pension if you wish to. For every nine weeks that you defer it, it rises by 1%, so for a full year, it's 5.8%. When you decide to take it you just phone the Pensions Service and they will start it for you within nine weeks. For more information, click here.


State Pension Forecasts

It is an extremely good idea to obtain a pension forecast in good time before you retire so that you can see how much you will get and challenge it if you think it is wrong.

There are a number of ways in which you can get one and all the details are at: https://www.gov.uk/check-state-pension

 

This Guide is written by Retirement Specialist Dave Sinclair supported by members of the LaterLife team. As well as writing on retirement matters Dave is Training Director at LaterLife and responsible for the content and continuous improvement of LaterLife's Retirement Courses.
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