Financial expert explains changes to the state pension
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The state pension may seem like a given, but not everyone is entitled to the full amount. The amount of state pension an individual qualifies for depends on their National Insurance (NI) record when they reach state pension age.
State pension age is currently set at 66, however this will increase in the future.
By 2028, the state pension age will rise to 67, and it will increase again to 68 by 2046.
This means future generations will likely have to wait longer to access their state pension.
Britons usually need to have 10 qualifying years on their National Insurance record to get any new state pension.
The new state pension is paid to people who reached state pension age on or after April 6, 2016.
This means anyone who reaches state pension age from now on should get the new state pension, providing they have the sufficient qualifying years on their record.
To get the maximum amount of pension available, Britons need 35 years of contributions on their National Insurance record – although some may get a different amount if they were contracted out.
It is important to note that these years do not need to be consecutive. People can have gaps in their record and still get the full new state pension, as long as they have enough contributions overall.
There are three ways to earn qualifying years on a National Insurance record:
- Through employment or self-employment
- Receiving National Insurance credits
- Making voluntary contributions.
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National Insurance through working
Britons will earn a qualifying year on their record if they pay National Insurance and also meet either of the following criteria:
- They are employed and earning over £184 a week from one employer
- They are self-employed and pay National Insurance contributions
However, it may still be possible to get a qualifying year if someone earns between £120 and £184 a week from one employer.
National Insurance credits
Credits are given to people who are not working. This can be for a variety of reasons, such as illness or disability, caring responsibilities or simply being unemployed.
The crucial thing is that the credits are awarded to people who receive benefits related to their circumstances.
For example, someone can get National Insurance credits if they claim any of the following:
- Child Benefit (for a child under 12, or under 16 before 2010)
- Jobseeker’s Allowance
- Employment and Support Allowance
- Carer’s Allowance.
People who do not pay National Insurance through employment or receive credits may still be able to improve their record.
This can be done by paying voluntary contributions.
Voluntary contributions are a potential way of filling gaps in someone’s National Insurance record and increasing their state pension entitlement in the process.
Britons can check their National Insurance record via the Government website and see if there are any gaps which may mean they do not get the full state pension.
If so, they can then find out if paying voluntary contributions is an option.
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