Your guide to the state pension and other pensioner benefits
The basic state pension (until April 2016)
In 2014/15 the basic state pension pays £113.10 a week for individuals who have made 30 years worth of National Insurance (NI) contributions. Married couples receive double this amount but only if both partners have paid enough NI.
If one partner has less than 30 years the payment will be less than £113.10 per week but you might be able to top up by paying voluntary National Insurance contributions. Each year the payment rises by the highest of earnings growth, increases to the consumer prices index or 2.5% (known as the 'triple-lock').
- State pension payments commence once you reach state pension age. This is gradually being pushed back and will currently be somewhere between 61 and 68 depending on your sex and date of birth.
- If you plan to work beyond your state retirement age or if you have sufficient income from private pensions, you may decide to defer your pension. The government encourages individuals who can afford to do this by increasing the amount they will eventually be able to claim. For every five weeks you defer taking your pension, your payments will be increased by 1%, which racks up to 10.4% a year.
- For those people who haven't paid enough NI to be eligible to claim the full basic state pension it may be worth buying voluntary contributions. However, it's worth noting that if you have been in receipt of certain unemployment or sickness benefits, have taken time out to raise children or to care for a sick or disabled person, you will receive NI credits to plug these gaps in your payment record.
The additional state pension (until April 2016)
- The additional state pension tops up your basic state pension and how much you get is based on your earnings and National Insurance contributions.
- Prior to 2002 the scheme was known as Serps or the State Earnings Related Pension Scheme and only people in work were eligible. People who started paying in after 2002 will be in the State Second Pension or S2P - this scheme was intended to help people on low incomes or those that are not able to work. So in addition to employees it also covers carers, those caring for children under 12, those claiming the carer's allowance or some disability benefits.
- Until 2012 it was possible to contract out of the second state pension and a portion of your National Insurance contributions was rebated back into your company pension. This relieved pressure on the government and gave savers the opportunity to try and boost what they would have got from the state. So, just how much you receive would depend on the level of NI rebates and the growth in your pension. However while members of final salary schemes can still contract out of S2P, this is no longer an option for members of defined contribution (also known as money purchase) schemes.
The new 'flat rate' pension (applicable from April 2016)
- From April 2016 the current basic and additional state pension (S2P or state second pension) will be scrapped and replaced by a new single tier (or flat rate pension).
- The new state pension will pay the equivalent of £144 in today's money to everyone who has paid 35 years of national insurance contributions. People with less than 10 years of NI contributions will receive no pension while those with between 10 and 34 will receive a proportionate amount.
- Every person has their own entitlement - you will not benefit from contributions your spouse has built up and there will be no special treatment for people who have been bereaved or are divorced.
- However, as with the current state pension you may be eligible for NI credits if you have taken time to raise children, be a carer or have been claiming certain benefits. If you still don't have the necessary 35 years of contributions you may be eligible to buy credits.
- The Pensions Credit will continue to provide a safety net however it is anticipated that fewer people will need to claim it.
- Some people will do better under the new deal than others. Find out how the new flat rate pension will affect you
What if I am on a very low income?
- If your income is below £148.35 (in 2014/15) a week for individuals (or £226.50 for couples) you could be eligible to claim the Pension Credit which tops up your income to this minimum level. Claimants of the Pension Credit will also be eligible for free NHS dental treatment.
- If you rent your home and receive the guarantee part of the Pensions Credit you may also be able to have your rent paid in full by Housing Benefit. Going forward the Pensions Credit may be amended to accommodate rental payments meaning pensioners do not need to make two separate claims. However this is not expected to happen until October 2014 at the earliest.
- If you claim the guarantee credit you may also get your council tax paid for you. If you don't receive the credit but still have a low income and your savings are below minimum levels you may be eligible for some support. Contact your local council to find out if you are eligible.
What if I have health problems?
- Attendance allowance is payable to people aged 65 or over who have health problems that mean they require personal care such as help with dressing, feeding or washing. Alternatively you may require supervision to ensure you remain safe (for example you have seizures, are a danger to yourself or can be confused, forgetful or disorientated) or have mobility issues that prevent you moving around your home safely. In 2013/14 the rates payable are £81.30 a week if you need help during the day and the night, or £54.45 a week if you only need help during the day or at night. This benefit is not means-tested, meaning your income or savings levels do not affect your ability to claim.
What if I am a carer?
- Carer's allowance pays £61.35 a week to people who spend a minimum of 35 hours a week caring for a disabled person and it doesn't have to be somebody you live with. However many pensioners will find they are not eligible to claim as it is not payable if your state pension is more than £59.75 a week (nor if you earn more than £100 a week).
Age UK says that even if you aren't eligible it may still be worth making a claim as it could bump up other benefits you receive, however it also warns that claiming the benefit may reduce the benefits the person you care for receives. For these reasons it is best to consult your local Age UK before submitting a claim.
Other pensioner benefits
- Travel concessions: Older people in Great Britain are entitled to free bus travel.
- Winter fuel payment: Pensioners are also entitled to the winter fuel payment. Individuals aged under 80 get £200 each winter, couples get £300. Once you are 80 payments increase to £300, couples where both are aged 80 are over get £450.
- Free prescriptions and eye tests: Everyone aged 60 or over is eligible.
State Earnings Related Pension
SERPS was the name of the government’s additional pension scheme that lasted until April 2002 and it is now called the State Second Pension (SP2). Anyone earning more than over £75 a week and had not “contracted out” would have been building up an additional pension under SERPs. If you started a personal pension plan, you “contracted out” of SERPs and the government paid part of your National Insurance contributions into the plan once a year in the form of a rebate. However, as SERPs was directly related to earnings, the amount people will get when they retire will vary.
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.