Pension clinic: how much is your state pension worth?
A valuable new website service has been launched which will be of interest to anyone who wants to know what they are likely to get under the new state pension system, and also for anyone interested in understanding their record of national insurance (NI) contributions.
It is still being tested, but hundreds of thousands of people have already used it, and it represents a big step forward on what was available previously.
Until recently, if you wanted to know what you would get under the rules of the new state pension scheme, introduced in April 2016, you could only get a personalised statement if you were within 10 years of state pension age.
The new service is available to people of all ages. The site will tell you how much you have already built up - in effect, what you would get if you could draw your pension today. It will also tell you the most you could get if you went on working or contributing for additional years.
National insurance information
An interesting by-product of the site is that it also provides you with year-by-year information about your record of NI contributions. The building block of your entitlement to a state pension is something called a 'qualifying year'.
This is a year in which you either paid a minimum level of NI contributions or where you were 'credited' into the system for things like bringing up younger children or caring for a disabled person and receiving certain benefits.
For every individual year since 1975, the website tells you whether the year in question is a 'qualifying year' towards your pension. It also gives you a summary of your record before 1975 when the system worked on a slightly different basis.
One of the advantages of viewing information about your NI record is that many people will have gaps for one or more years. The site will tell you which years are not qualifying and what you can do about it.
For example, if you only worked for part of a year it might be that a modest top-up of voluntary NI contributions could convert that year into a 'qualifying year' and potentially boost your pension.
The main downside of the new site is the hoops that you have to jump through to prove who you are.
It is, of course, entirely understandable that the government expects people to prove their identity before handing out sensitive personal information, but it can take a little while to go through the necessary steps.
If you already have a 'government gateway' login, then as long as you can remember those details you will be up and running in no time.
The other option, and one which is likely to be a feature of our digital lives in the future, is that you can opt for the 'verify' service.
Under this approach you are given a range of providers of online ID services (including household names like the Post Office and the credit checking agency Experian, among others). You choose one of these and then go through the steps that they require.
This is likely to involve having access to photo ID such as driving licence and/or passport, plus other means of providing your identity.
Once you have done this once, you can use this 'Verify' login across a range of online services. For example, as well as using my 'Verify' login to check my state pension on this site, I use the same login to file my annual tax return.
It has taken a long time to get to this point, but this new website represents a step change in availability to the public of information about NI and pension rights. If you can overcome the hassle of getting through the identity verification steps, I think you will find it of interest.
Steve Webb is director of policy at Royal London.
This article was originally written for our sister magazine, Money Observer.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.