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THE EDUCATION SECTION October 2011 State Pensions Updated April 2013 ____________________________ Key points Lloyd   George   introduced   the   first   ‘State’   pension   in   1908.   It   was   a   ‘means   tested’   benefit   of   between   10p   and   25p a week (or 2 shillings and a Crown in ‘old’ money), from age 70. In   1925   a   contributory   State   scheme   was   introduced   and   the   pension   was   50p   a   week   (10   shillings   -   otherwise known as 10 ‘bob’) from age 65. Basic state pensions were formally introduced in 1948, following the Beveridge Report. The pension was - o £1.30 a week for a single person (£1/72d) o £2.10 for a married couple (£2/24d) o paid from age 65 for men and 60 for women The State Pension Age is increasing. What is the state pension? The   basic   state   pension   is   a   government-administered   scheme,   funded   by   National   Insurance   (NI)   contributions,   to give   those   who   have   reached   the   State   Pension   Age   (SPA)   a   guaranteed   weekly   income   -      currently   just   over   £110 a   week .   The   basic   state   pension   is   NOT   means   tested   &   is   NOT   dependent   on   former   salary   or   how   much   a   person has in savings.   Instead,   the   amount   received   depends   on   the   amount   of   NI   contributions   paid   &   for   how   many   years   those   NI contributions have been paid. How is it funded? The   State   scheme   is   funded   on   a   ‘pay   as   you   go’   basis.   This   means   that   there   is   no   underlying   fund   from   which retirement   benefits   can   be   taken.      Instead,   the   NI   contributions   of   the   current   working   population   are   used   to   pay the State pensions of those who have reached SPA. When do I get the State Pension? The situation now! When   do   I   get   the   State   Pension?   The   situation   now!   Currently,   the   SPA   for   men   is   65   and,   until   6   April   2010,   it was   60   for   women.   However,   the   SPA   for   women   is   now   in   the   process   of   being   increased,   and   by   November   2018 it   will   be   65   for   both   men   AND   women.   In   addition,   the   current   law   also   provides   for   the   following   FURTHER increases to the SPA - o an increase from 65 to 66 between 2018 & 2020 o an increase from 66 to 67 between 2026 & 2028 o an increase from 67 to 68 between 2044 & 2046 What the situation might  be soon! The   Government   is   constantly   announcing   new   proposals   to   amend   the   SPA.   Click   here    for   up   to   date   information about the proposals. Confused? Don’t   be!   This   useful   SPA   calculator    will   let   you   know   when   you   can   expect   to   receive   your   State   Pension   based   on the CURRENT  rules. Who qualifies for the basic state pension? To get the FULL state pension you will need to have worked for most of your working life and paid NI contributions (or have been on qualifying benefits.) The amount you are entitled to is calculated by the number of NI qualifying years you have accumulated.  Again, the qualification criteria changes with the year you were born. You will need 30 qualifying years to get the FULL basic pension. If you have a shortfall you will receive a letter from HM Revenue and Customs once a year to inform you of it. What is a qualifying year? To   gain   a   qualifying   year,   you   need   to   earn   a   set   minimum   during   a   tax   year   (6 th    April   to   5 th    April)   and   pay   the required   NI.   For   2013-14,   this   is   £5,668   for   both   employees   &   the   self-employed.   In   past   years,   the   amount   was, of   course,   lower,   but   it   has   always   been   at   a   similar   figure   in   relation   to   average   salaries,   so   only   those   on   very   low wages could have missed out. So   if   you   were   working   full   time,   even   on   the   minimum   wage,   or   even   just   a   few   days   a   week   throughout   the   year, it is likely you have earned a qualifying year. Don't have enough qualifying years? You   may   still   be   entitled   to   a   PARTIAL   state   pension   but   it   depends   on   when   you   hit   retirement   age   and   how   many qualifying years you have. If   you   have   at   least   one   qualifying   year,   you   will   get   1/30 th       of   the   full   amount   for   each   qualifying   year.   Therefore,   if you have 18 qualifying years you will get 18/30 th ’s (60%) of the FULL State pension. How much will I get? There is a complicated maze surrounding the amount you get, but a brief summary is as follows: o Full individual basic state pension: £110.15 per week If   you   are   a   woman   who   has   not   qualified   for   the   basic   state   pension,   but   your   husband   is   already   claiming,   there is   a   special   basic   couples   pension   you   could   get   once   both   of   you   reach   retirement   age.   If   both   partners   qualify   for the   basic   pension   in   their   own   right   and   their   total   individual   pensions   are   more   than   what   they   would   get   as   a couple, they get that larger figure. o Couples basic state pension: £176.15 per week Remember - the basic state pension is taxable and counts as taxable earnings. Can I get a forecast of my expected State Pension? Yes. Simply click here to go straight to the The Pension Service website Does the Basic State Pension award increase every year? Yes. It rises every April. Until April 2011, the basic State Pension was increased in line with the growth in prices. From April 2011 the basic State Pension is protected by the government’s 'triple guarantee'. This means it will be increased every year by whichever of the following is the highest: o growth in average earnings o growth in prices (using the previous September’s CPI figure) o 2.5% This only applies to the basic State Pension. This does not apply to the additions to State Pension. The amount of basic State Pension you receive when you reach your State Pension age may be more than the amount shown in your forecast. What happens when I die? Your basic State Pension cannot be passed to someone else when you die. Though if you delay claiming your State Pension, your widow, widower or surviving civil partner may be entitled to some of the cash. If you have contributed towards the Second State Pension (S2P), your spouse or civil partner can inherit some of this. If you have no spouse or civil partner, any S2P you put off claiming becomes part of your estate. Find full details on the Gov website. A surviving partner may be entitled to a one-off bereavement payment or bereavement benefits for a year. Once again, more details are available from the Gov web site SERPS and the State Second Pension (S2P) This   additional   State   Pension   has   gone   under   different   names   in   the   past.   It   has   also   been   known   as   the   State Graduated Pension  and the State Earnings-Related Pension Scheme  (SERPS). Until   you   reach   State   Pension   age   your   SERPS   and   S2P   will   be   revalued   each   year   in   line   with   the   growth   in average earnings. Once you have reached State Pension age it will then normally increase in line with prices. Who gets the additional State Pension? You can build up additional State Pension if you are below State Pension age and you are: o employed and earning over £5,668 (from any one job) o looking after children under 12 years old and claiming Child Benefit o caring for a sick or disabled person for more than 20 hours a week and claiming Carer's Credit o a registered foster carer and claiming Carer's Credit o receiving certain other benefits due to illness or disability Changes to contracted out pensions from 2012 The   rules   for   contracting   out   of   S2P   changed   in   April   2012.   The   changes   mean   that   contracting   out   is   no   longer possible through: o a money-purchase (defined-contribution) occupational pension scheme o a personal pension or a stakeholder pension If   you   were   contracted   out   through   one   of   these   schemes   on   6   April   2012,   you   would   have   automatically   been brought back into S2P. How do I claim the State Pension? The   Pension   Service   should   automatically   send   you   a   State   Pension   Information   Booklet   and   invite   you   to   claim four   months   before   you   reach   State   Pension   age.   The   Pension   Service   State   Pension   claim   line   can   be   contacted   on 0800 731 7898. ____________________________ As always, p lease do not hesitate to contact us  if you would like further details or information.