The new State Pension explained
The new State Pension replaced the Basic State Pension in April 2016.
- The new State Pension started in April 2016 and is currently £203.85 a week.
- You currently need to have paid National Insurance contributions for at least 35 years to get a full new State Pension.
- You can get a proportionately smaller new State Pension if you have less than 35 qualifying years.
- New State Pension increases each year by the highest of:
- the growth in average earnings
- Consumer Prices Index (CPI).
The new State Pension started in April 2016, a year earlier than originally planned. However, individuals who reached state pension age before April 2016 still receive the Basic State Pension.
The new State Pension is currently £203.85 a week.
Salary related contracting-out ceased when the new State Pension started.
An individual needs 35 years of National Insurance contributions or credits before they can receive the full new State Pension. This is an increase from 30 years for the Basic State Pension.
The minimum qualifying period is 10 years of National Insurance contributions or credits. An individual with between 10 and 35 years will get a proportion of the benefit, for example somebody with 28 years’ worth of National Insurance contributions or credits will get 28/35 x £203.85 = £163.08. It is possible to pay voluntary National Insurance contributions to buy more qualifying years.
Once an individual has 35 years of National Insurance contributions or credits no additional benefits will accrue but they will still have to pay National Insurance contributions on their earnings until they reach state pension age.
The new State Pension can be deferred but no lump sum will be available unlike the Basic State Pension.
Does the new State Pension increase in payment?
Yes. For individuals claiming the pension in the UK the rate of new State Pension increases from April each year by at least the level of growth in average earnings. The triple-lock guarantee usually applies so that the new State Pension increases each year by the highest of:
- growth in average earnings
- Consumer Prices Index (CPI)
Does the new State Pension increase in payment for those living overseas?
It depends on the country of residence if there is an increase. See GOV.UK: State Pension if you retire abroad for more information.
Anyone with an existing history of National Insurance contributions on April 2016 is entitled to a starting pension equal to the higher of their entitlement under the new and existing rules.
A contracted-out deduction is applied for periods of contracted-out employment. The Department for Work and Pensions has issued a guidance document, The Single-Tier Transition and Contracting Out (opens in a new window), which explains how the deduction is calculated.
If the starting amount is less that the new State Pension this can be increased by 1/35th for each year of National Insurance contributions or credits after 5 April 2016.
If the starting amount is more than new State Pension no further benefits will accrue but the extra benefits are known as a protected payment. This is protected but only by CPI not the triple lock.
The new State Pension is based on personal National Insurance contributions rather than the spouses or civil partners. Transitional provisions do recognise inherited benefits.
More information can be found in our article State pension transition.
Abolition of the savings credit
The savings credit element of the State Pension Credit is only available to those who reached state pension age before 6 April 2016.
From 15 May 2019 when a couple are claiming married couples Pension Credit both of them have to be over State Pension age. Any couple who were in receipt of pension credit before this date keep their entitlement.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.