BENEFITS EXPERT: Decoding the new state pension

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I understand that the new State Pension will be £155.65 a week from April. Will this be paid to all pensioners?

No. The new pension arrangements will only apply to people who reach State Pension Age on or after April 6, 2016. And even some of those will not receive the full £155.65. Existing pensioners will get the usual annual uprating which this year will be 2.9%, bringing the standard rate of Basic State Pension up to £119.30 a week.

Will the new State Pension be a better deal than that paid to today’s pensioners?

Not necessarily. The State Pension under current rules may consist of the basic pension, additional pension and graduated pension. The new ‘Single Tier’ pension payable from April will replace not only the basic pension but the other elements as well. So if someone has a pension under current rules where these elements add up to more than £155.65, they are better off with what they have.

So what sort of situation does someone have to be in for the new pension to be better than the current one?

As is always the case with pensions it depends upon what you have been paying in by way of contributions. The new pension will, for instance, be more generous for low-paid and self-employed people provided they have a National Insurance record covering the right number of years.

 Currently, those on low earnings, including those who get National Insurance ‘credits’ because they cannot pay contributions, may not be able to look forward to a pension that is much more than the basic, which is currently £115.95 a week. This is also the maximum you can expect if you have always been self-employed.

 At present such people need to have had 30 years of National Insurance for the full basic pension. Under the ‘Single Tier’ rules they could receive the full £155.65 if they have 35 years.

Will everyone with 35 years of National Insurance reaching pension age after April qualify for £155.65 a week?

No. This applies in particular to those who have been in ‘contracted out’ pension schemes, such as those provided by certain employers. As they have been paying lower National Insurance Contributions, the Government will make a reduction to their pension calculation when working out their entitlement under the 35 year rule.

Can I receive a State Pension based on my spouse’s National Insurance record?

Not if you reach pension age on or after 6 April. The rules that currently enable someone to qualify on the record of their spouse, widow, widower or divorced husband or wife will no longer apply to you.