State pension - how much are you entitled to?
The basic state pension is paid to people over state pension age who have made enough national insurance contributions in qualifying years. The number of qualifying years you need to get a full basic state pension of £107.45 a week depends on your age and sex:
- Men born before 6 April 1945 usually need 44 qualifying years
- Men born on or after 6 April 1945 need 30 qualifying years
- Women born before 6 April 1950 usually need 39 qualifying years
- Women born on or after 6 April 1950 need 30 qualifying years.
If you have reached state pension age without building up the full entitlement you will still be able to claim a portion of the state pension. How much will depend on how many qualifying years you have built up. You can get a state pension forecast at direct.gov.uk.
Pension Credit - who's eligible and how to claim it
Pension Credit is a means-tested benefit designed to top up low pension incomes. It is not linked to national insurance contributions and around four million people are entitled to it, but only one in three of those eligible actually claim it.
It is made up of two parts – the Guarantee Credit and the Savings Credit.
The Guarantee Credit is designed to top up everyone's state pension to £142.70 a week if you are single, or £217.90 for couples.
The Savings Credit is designed to reward people who have made some provision for their retirement such as savings or a second pension.
You need to have a weekly pension income of at least £111.80 for single people (£178.35 for couples) in order to be eligible for the Savings Credit. The amount you can receive from the credit is capped at £18.54 per week for single people and £23.73 for couples.
“Pension credit can make a significant difference to a person's quality of life”, says Michelle Mitchell, charity director general of Age UK. Unfortunately, at present there is a “benefits maze facing older people,” she says.
You can navigate the maze with Age UK's pension For once in credit calculator available at ageuk.org.uk.
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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.
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.