PensionBusiness - Pension News, February 2011

How much will my pension be from the state?

For the uninitiated this is a surprisingly difficult question to answer. This has a long and a short answer. Here is the short answer, for those that can stomach the long answer please read on.

Long Answer

The answer is easiest to give when you are claiming a pension for your own National Insurance Contributions (NIC).

There are several components to the State Pension: Basic State Pension, The State Graduated Pension Scheme, The State Earnings Related Pension Scheme and The State Second Pension. An individual may be entitled to all of these or none.

The Basic State Pension

The basic state pension is set at £97.65. This is for people who have 30 years of NIC. With less than 30 years contributions you will receive proportionately less basic state pension. You can be credited with a year's NIC in a few ways:

The standard method is paying NIC in a given year (Except for some women who may still be paying a reduced rate).

People earning between £97 and £110 a week will be credited as contributing to NIC even though they don't pay any!

People claiming unemployment, maternity and sickness benefits will be automatically credited.

People in school or an approved training course with receive credits, but people at University won't.

Carers now receive a credit for NIC for time spent looking an elderly or sick relative.

The State Graduated Pension Scheme

This was aimed to provide an additional pension on top of the basic state pension relating to earning. This is a benefit that was only available to employees between 1961 until 1975. This could have added an extra £9.92 a week pension for a man and £8.30 for a woman.

The State Earnings Related Pension Scheme (SERPS)

Again this does not cover the self employed. The initial plan was to provide a more comprehensive additional pension to the basic state pension based upon earnings. This was progressively watered down as the real cost of the scheme became apparent. The actual amount of this can only be accurately calculated by the State Pension Forecasting Team.

The State Second Pension (S2P)

This was the replacement to SERPS and the aims of the pension changed from providing additional pension relating to earning, to providing additional pension to low earners and non earner, as well as encouraging higher earners to provide their own provision.

State Pension Credit

The state pension credit provides an extra source of income for single people with a weekly income below £183.90 and a couple's weekly income of £270.13. This will be paid in the form of a 'guaranteed credit' and/or a 'savings credit'.

The 'guaranteed credit' is currently for those aged over 60 (although this will gradually increase) and eligible for income support. This means there is a minimum level of income people in this age group will get. The current rate for a single person is £132.60 per week and £202.40 for a married couple.

Under the state pension credit there is also a 'savings credit' currently payable from the age of 65. This aims to reward people for having saved for their retirement and yet have as a single person have an income below £183.90 per week or as a couple and have an income under £270.13 per week.

This is a means tested benefit. The first £10,000 of savings are ignored, but all further savings even cash ISA are deemed to provide income and reduce the payment of the benefit.

An individual with savings of under £53,000 and a couple with savings under £67,000 will be entitled to state pension credit as long as they have a single income under £183.90 per week and £270.13 for couples. It is estimated that over half of current pensioners are entitled to this benefit.

Claiming on someone else's National Insurance Contributions

An extra portion of pension can be claimed if an individual hasn't qualified for 60% of the basic state pension on their own. They may be able to claim a 'category B pension' based on their partner's NIC record. The additional category B pension would be added to their existing basic state pension to making their pension up to a maximum of 60% of the basic state pension.

You can get a forecast of your state pension from The State Pension Forecasting Team. This free service will detail your current and projected benefits from your actual and predicted NIC.

The Pensions Service will also calculate entitlement to State Pension Credit for all new pensioners. Many existing pensioners have to claim. A good proportion has not.

With the forecast you may still need a Pension Expert to fully explain the results.

Short Answer

You can get a forecast of your state pension from The State Pension Forecasting Team. This free service will detail your current and projected benefits from your actual and predicted NIC.

The Pensions Service will also calculate entitlement to State Pension Credit for all new pensioners. Many existing pensioners have to claim. A good proportion has not.

With the forecast you may still need a Pension Expert to fully explain the results.

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