The new State Pension scheme

The government introduced a new State Pension scheme from April 2016. The new scheme pays a ‘flat-rate’ pension up to a maximum of £164.35 a week (2018/2019), for people retiring on or after 6 April 2016.

In reality, some people will get more than this and others less:

Why you might receive more than the maximum flat-rate.

  • If you would have received a higher State Pension under the previous State Pension scheme you’ll still be entitled to the higher amount (the previous State Pension scheme included an earnings related element which could result in a higher figure).
  • If you choose to delay receiving your State Pension when you reach State Pension Age, it will be increased when you eventually decide to take it.

Why you might receive less than the maximum flat-rate

  • To receive the full amount you must have paid National Insurance (NI) contributions (or received NI credits) for 35 years (otherwise the amount you receive will be proportionate). You can choose to pay voluntary contributions to make up for any shortfall you may have.
  • You will receive less if you were ‘contracted out’. This means you were opted out of the additional state pension scheme that existed before April 2016. If you were in a pension scheme or personal pension plan you may have been ‘contracted out’.

Please note that if you have less than 10 years NI contributions or credits you won’t normally be entitled to any State Pension.

Does the State Pension increase each year?

The State Pension will increase each year by the higher of the rise in earnings, prices or 2.5%. This approach should raise the standard of living of people in retirement over time. The present government has promised to maintain this until at least 2020.

Retiring abroad

Bear in mind that if you choose to retire abroad you may not receive increases. Your State Pension can be paid anywhere in the world, however, you’ll only receive any increase each year if you choose to live in another part of the European Economic Area or any country that the UK has an agreement with to allow increases.

What if you don’t qualify for the maximum?

If you don’t qualify for the maximum State Pension, you can boost the amount you will receive if you’re prepared to pay extra. You have the option to ‘buy’ additional years National Insurance contributions.

Can I delay taking my State Pension?

If you decide to delay taking your State Pension, after you reach your State Pension Age, your State Pension will increase by 1% for every 9 weeks you delay. That means an increase of around 5.8% for every full year but please note that you will not qualify for any increase during any period you are claiming benefits.

To learn more about the new State Pension and the changes please go to GOV.UK.