UK State Pensions Help

Published / Last Updated on 14/06/2015

UK State Pensions HelpUK State Pensions Help - Helping you understand your likely State Pensions benefits.

This centre has recently been overhauled to take account of all of the changes to the state pension, the new state second pension, the changes to the old minimum income guarantees and the new Pension Credit system.

What's in the State Pensions Centre:

Two Tier State Pensions

Most employees used to build up two levels of State Pension.  Most self employed people only build up one as they pay less national insurance.

This will now been stopped and replaced by the Flat Rate State Pension System

Contact us today for expert help with UK state pensions.

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1. Basic State Pension 2013-14Basic State Pension

If you pay adequate National Insurance contributions you will be entitled to a Basic State Pension when you retire. This pension is provided at the State Pension Age and usually increases in line with retail prices.

Budget 2013 confirmed a new flat rate pension will be brought forwards and start in 2016.

For 2013-14 Basic State Pension rates are as follows:

  • Single Person:  Basic State Pension - £110.15 per week 2013/14
  • Man with dependent wife: Basic State Pension - £176.15 per week 2013/14
  • Couple both with full State pension: Basic State Pension - £220.30 per week 2013/14

Don't forget you may also have a Minimum Income Guarantee in the form of a Pension Credit addition.

How much will I receive as a Basic State Pension?  You can get a Basic State Pension Benefit Forecast for free by completing a BR19 Form

Am I entitled to a State Pension?  You are only entitled to a full Basic State Pension if you have paid adequate National Insurance Contributions or have earned credits towards National Insurance contributions when not working.

Full Basic State Pension - you are only entitled to a full Basic State Pension if you have paid enough National Insurance Contributions (or been credited as having done so)

New Rules: 30 Years National Insurance Contributions Records

  • You have to have paid National Insurance or received special credits to be granted a year towards your Basic State Pension.
  • Credits towards your basic state pension are given for various reasons such as you being registered unemployed through to having things like Home Responsibilities Protection e.g. not working but being in receipt of child family allowance (particularly relevant to mothers), or receiving income support because you look after somebody.

2. State Pension Age Changes and State Pension Increase Myth

£140 Weekly State Pension Not What it Seems

Many of us will have looked on with pleasant anticipation at the news of our state pension being improved dramatically under new proposals.
 
The Government’s Headlines

  • £140 per week state pension for all, it could even be as much as £155 per week. 
  • Only 30 years National Insurance Contribution paid to receive a full state pension, no longer 40 years +.
  • Too good to be true? Sadly, yes it is.  In our opinion, we will all be worse off.

State Pension Age Increases

65 for All - Men already receive state pension at age 65. State pension ages for women are being phased in to increase to age 65.  If you are a female born between April 1950 - March 1955, you have a phased retirement age between 60 and 65, if born after April 55, your retirement age is 65..

66 for All - State Pension at age 66 for Men and Women this gradually increases from 65 to age 66 from Dec 2018 to April 2020 (it may even be from 2016 for men). If born April 1959 - March 1960 you will have a phased retirement age.  If born after April 1960, retirement age is 66.

67 for All - State Pension at age 67 gradually increases from 66 to age 67 from 2026 to 2036 i.e. if you were born April 1968 - March 1969 you will be in the phased retirement age stage, if you were born after April 1969 onwards retirement age is 67.

68 for All - State Pension at age 68 from 2036 through to 2044 i.e. if you were born between April 1977 - March 1978 it is likely be phased in from ages 67 to 68 and if born after April 1978, State Pension Age is 68.

70+  Age for all - who knows? The plan is to increase state pension age with life expectancy. 

3. The State Pension Forecast

Everybody is entitled to obtain a forecast of what benefits they may obtain from the State when they retire.  It can be an eye opener. 

This is done by completing a BR19 form.

You can obtain A STATE PENSION FORECAST by completing a BR19 form to send it to the Department for Work and Pensions.

Completion only takes a couple of minutes and it is time well spent as everybody should have an idea of what to expect when they retire. 

It may help you make important decisions on what you should be saving yourself.

You can elect to have the report sent to yourself directly or you can sign the last page and have it sent via our offices if you would like us to explain the contents.

4. Flat Rate State Pension Minimum Years to Qualify.

The flat rate state pension starts in 2016.

The pensions secretary, Steve Webb, has confirmed that the minimum number of years to qualify for state pension in the UK will be 10 years.

What are Qualifying Years?

Years that you pay National Insurance/Social Security contributions.

Years that you receive credits towards social security contributions such as

  • Home responsibilities protection: e.g. You are at home, looking after children and you are the person that receives the family allowance (chid benefit)
  • Registered unemployed and seeking work
  • Claiming other benefits that offer qualification such as disability benefits.

What if I have less than 10 years credits?

You are not entitled to a UK State Pension.

What if I am a foreign worker?

If you are a foreign national and work in the UK, it is possible to transfer your social security record for some countries.

  • European Union – It is possible to have the number of years credits your have built up in the UK transferred back to your European nation that you are living in at retirement age.
  • Outside European Union – This will depend upon the Social Security Agreement between the UK and the country in question.  E.g. UK an USA have an agreement.  UK and Australia do not as it was “torn up” by the Australian Government back in February 2001. 
  • You will need to check the Department for Work and Pensions Website to check whether an agreement is in place http://www.dwp.gov.uk/international/social-security-agreements/list-of-countries/

How many years are need to qualify for a full, flat rate UK state pension?

  • You will need to have a full national insurance contribution record or other credits of 35 years to qualify for a full UK state pension.
  • If you are have between 10 years and 35 years credits, you will receive a proportionate state pension.

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Pension Credit 2013 -14 Explained.Pension Credit

Pension Credit came into effect on 6 October 2003.  It replaced the Minimum Income Guarantee.  The Pension Credit is made up of two elements: 

  • The Minimum Guarantee (MG)
  • Savings Element.

The scheme is very similar to the older style Minimum Income Guarantee MIG in that the guarantee pension income levels remain plus a new pension credit to reward you rather than penalise you for having saved for yourself (figures are weekly):

The figures below are the weekly pension entitlement figures as at April 2013 - 14.

Single Person:

  • Basic State Pension - £110.15 per week
  • Minimum Guarantee - £145.40 per week
  • Pension Credit - Savings Element Maximum - £18.06 per week

Man with dependent wife:  

  • Basic State Pension - £176.15 per week
  • Minimum Guarantee - £222.05 per week
  • Pension Credit - Savings Element Maximum - £22.89 per week

Couple both with full State pension:  

  • Basic State Pension - £220.30 per week
  • Minimum Guarantee - £222.05 per week
  • Pension Credit - Savings Element Maximum - £22.89 per week

Means Tested Income

Benefits are means tested against your total income. If you have too much income in retirement, you may not receive any top-ups.

They also means test on an assumed income return on assets. Savings below £10,000 are ignored (was £6000 before November 2009). Savings above this amount have an assumed income return of 10%. Other income is also taken into account.

How does the Pension Credit work?

The Guaranteed Minimum Element (Over 60's) is Single person £145.40 per week and a couple £220.30 per week.

  • The Savings Element (for over 65's or at least one person in the relationship over 65) is worked out as a maximum 60p income increase for every £1 in excess of the Basic State Pension. This is subject to a maximum Pension Credit given of £18.06 (singles) and £23..89 (couples) per week.

Income above Minimum Guarantee? If your income (or assessed income) exceeds the MG threshold then you effectively receive a pension credit reduction of 40p for every £1 above the MG threshold.

  • Therefore, if your income (or assessed income) exceeds £191.90 per week for single people and £279.27 per week for couples, you will receive no Pension Credit at all.

Sound complex?  Of course it is, so here are a few examples:

1) David is single and 65, he has the maximum basic state pension of £110.15 per week, £9,000 cash ISA's and no other assets or income.
 Result:

  • His savings are ignored as they are below the £10,000 means tested threshold.
  • His assessed income is therefore £110.15 per week. This is below the Minimum Guarantee of £145.40 per week.
  • Therefore, he receives a "Minimum Guarantee" Pension Credit of £35.30 making his State Pension and Pension Credit Income up to £145.40 per week.
  • Total State Income: £145.40 per week. Total Private Income: £0.00 per week


2) Joanne, single, 65,  she has the maximum basic state pension of £110.15 per week, £13,000 in cash and ISAs and a separate private pension paying £8.52 per week.

Result:

  • Her first £10,000 savings are ignored, the excess is not.
  • Her assessed income is therefore £110.15 per week plus other income [pension income £8.52 per week plus assessed other income (£3,000 X 10%/52 weeks) = £5.77 per week] i.e. £14.29 per week 'other income'.
  • Total assessed income = £124.44 per week (£110.15 + £14.29). This assessed income is below the Minimum Guarantee of £145.40 per week.
  • She therefore receives the full "Minimum Guarantee" Pension Credit of £35.25 making her "State" Pension income £145.40 per week.
  • She then receives a bonus pension credit for having made some private savings provision herself in the form of pension and savings. 60p for each £1 earned is credited - £14.29 X 0.6 = £8.57 Savings Element. This is her Pension "Savings Element" Credit i.e. her bonus for at least having some pension.
  • She therefore receives a total 'State income' of £153.97 per week (minimum guarantee £145.40 + savings element pension credit £8.57) plus her own private pension income of £8.52 per week = TOTAL Income £162.49 per week.
  • Total State Income: £153.49 per week.  Total Private Pension Income: £8.52 per week.


3) Roger, single, 65, has the maximum basic state pension of £110.15 per week plus a separate private pension paying £60.00 per week. Total income £170.15 per week.
Result:

  • His income is above the minimum guarantee of £145.40 per week by £24.75 per week, so no Minimum Guarantee applies.
  • The maximum pension credit savings element for a single person is £18.06 per week.
  • As his income is above the minimum guarantee, he receives a reduction in the Pension Credit by 40p for every £1 he receives above the guarantee level £24.75 X 0.4 = £9.90.
  • The Pension Credit he receives is therefore reduced by £9.90 per week. £18.06 (the maximum savings element pension credit) less £9.90 (the reduction) is £8.16 per week.
  • Roger will receive a Savings Element pension credit of £8.16 per week.
  • This means his total weekly income is State Pension £110.15 plus £8.16 reduced savings element pension credit plus private pension £60.00 = £178.31 per week.
  • Total State Income: £118.31 per week. Total Private Income: £60.00 per week

Overall Summary 

  • If your income is high it means your pension credit will be reduced. If your income (or assessed income) exceeds £191.90 per week for single people and £279.27 per week for couples, you will receive no Pension Credit at all.

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3. Minimum Income Guarantee (MIG): Never Want To Rely on State Plan Today

**PLEASE NOTE THAT THE MINIMUM INCOME GUARANTEE WAS REPLACED BY THE 'PENSION CREDIT' ON 6 OCTOBER 2003. ** 

This page is for historical reference only.

"The State will still look after us if we have little money".   Yes they will but only up to a certain point.  For those who have been unable to make or have not made provision for themselves - the government will still try to help - but only up to a minimal level.  The Minimum Income Guarantee. 

They will top up your income if it is below certain thresholds.

MEANS TESTED - YOU WERE PENALISED FOR HAVING SAVED ELSEWHERE.

If you had assets elsewhere such as cash in a bank or building society, other investments, business assets or property (excluding your main home), the Department for Work and Pensions would take these into account and may reduce your MIG.

They discounted 10% of the value of an asset to cover any sale expenses that you would incur.  In simple terms, if you owned other assets below the value of £6,000, they would be ignored, if you had assets between £6,000 and £12,000, your MIG would be reduced by £1 for every £250 over £6,000 and if you had over £12,000 you will not receive any MIG top up at all.

How much was the Minimum Income Guarantee?

Available to people over age 60 - Weekly income top up figures as at 2003/2004.

Single Person:

Basic State Pension - £77.45 per week plus MIG Top up - £24.65 per week

Total Minimum Income Guarantee - £102.10 per week

Man with dependent wife:

Basic State Pension - £123.80 per week plus MIG Top up - £32.00 per week

Total Minimum Income Guarantee - £155.80 per week

Couple both with full State pension:

Basic State Pension - £154.90 per week plus MIG Top up - £0.90 per week

Total Minimum Income Guarantee - £155.80 per week

Other Benefits: You may have been entitled to other benefits in retirement such as housing benefits, other State organised pensions such as State Graduated Pensions, State Earnings Related Pensions (SERPS) and the State Second Pension Scheme as well as your own company or private pensions.

Pension Credit

With effect from 6 October 2003, the new Pension Credit came into force where people are now not penalised as much for having income from other sources when they apply for the above guaranteed income levels.  Learn about the Pension Credit.

Get a State Pension Forecast 

This is done by completing a BR19 form - you can download a BR19 form to send to the Department for Work and Pensions (formerly the DSS).

PLEASE NOTE THAT THE MINIMUM INCOME GUARANTEE WAS REPLACED BY THE 'PENSION CREDIT' ON 6 OCTOBER 2003

Speak to us today about pension credit.

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