How will the new state pension be calculated?

Published by Rachel Lacey on 17 December 2015.
Last updated on 17 December 2015

money in jar

If you reach state pension age (SPA) after 6 April 2015, you will receive benefits under the new state pension. This includes men born on or after 6 April 1951 and women born on or after 6 April 1953.

However, it’s not as simple as saying you’ll receive the headline rate of £155.65 a week. To get the full amount, you will need to have 35 years of National Insurance contributions (or credits). If you have between 10 and 35 years’ credits, your entitlement will be calculated on a pro-rata basis.

Deductions will also be made if you have ever contracted out. This is because you will have paid less national insurance as a result.

Will you get £155.65 a week?

Click here to read our guide to the new state pension

When determining your pension, the government will make two calculations – these are the amount you would be paid under the old scheme (including the basic and additional state pension) and the amount you would have received if the new scheme had been operating throughout your working life.

Your ‘starting amount’ will be the higher of these two figures. This provides some protection for those who would be entitled to more under the old scheme through the additional state pension payments, but as the additional state pension (and the ability to contract out) will cease when the new scheme is introduced in April 2016, there will be no further opportunity to carry on growing your entitlement.

The difference between the full new state pension and your starting amount is called a protected payment and, like your pension, will increase in line with inflation.

You can find out how much state pension you can expect by getting a state pension statement online at Gov.uk/state-pension-statement or call the Future Pension Centre on 0345 3000 168.

Can I boost my state pension?

If your starting amount is less than the full rate because you have not made enough NI contributions, you may be able to boost your entitlement by making voluntary NI contributions. You can usually pay contributions for the last six years – but, depending on your age, you may be able to pay more.

You may also be able to pay a further six years once you have reached your state pension age. How much your voluntary contributions cost will depend on whether you need to purchase Class 2 or Class 3 contributions, as well as the years your gaps cover.  To get advice on this and to get information on credits for parents and carers, you can call HMRC on 0300 200 3503.

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