Budget 2021: Experts outline state pension changes
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
The state pension hinges on National Insurance contributions made throughout a person’s lifetime. For the new state pension, a person will usually need at least 10 qualifying years on their record to get any sum at all. A person will, in most cases, need 35 qualifying years to get the new full state pension.
With the full sum currently worth £179.60 per week, most people will be striving to achieve the total amount from the Government.
However, due to rules, people will need to check if their National Insurance contributions actually count towards their state pension.
A failure to do so could mean Britons end up less in their state pension, which could derail their retirement plans.
For a year to be qualifying, a person usually needs to earn a certain amount money as well as paying the National Insurance contributions they are required to.
This could slightly change from tax year to tax year, so for those who think they may be on the threshold, it is important to check.
It will also differ for those who are employed under PAYE to those who are self-employed.
For employees, the sum works out as £120 per week, or £6,240 per year for the year to be considered qualifying.
A slight difference is noted for self-employed individuals, who need to earn £125 per week, or £6,515 per year for the year to count towards their state pension.
first direct offers £130 ‘free cash’ to savers but offer ends today [INSIGHT]
One million Britons could be owed £2,000 from the Government [UPDATE]
Cold Weather Payment Scheme: Could you be eligible? [EXPLAINED]
For most people, even those on low wages, this shouldn’t be a problem to achieve.
However, if someone works part-time or takes time off work, they will need to be careful if they want the year to count towards their state pension.
Those with gaps in their National Insurance record can attempt to rectify the issue by paying voluntary contributions.
The option should be carefully considered, though, as the Government states voluntary contributions do not always increase a state pension.
People should contact the Future Pension Centre to see if they can benefit from voluntary contributions.
They may also wish to take financial advice on the matter to see if it is appropriate for their circumstances.
Valid National Insurance contributions and credits made before April 6, 2016 do count, however.
The older record is used to calculate a person’s “starting amount”, which forms part of their new state pension.
What is happening where you live? Find out by adding your postcode or visit InYourArea
The starting amount will be the higher of either:
- The amount a person would get under the old state pension rules – including the basic state pension and Additional state pension
- The amount a person would get if the new state pension had been in place at the start of their working life
If a person’s starting amount is less than the full new state pension, it is not the end of action they can take.
People will be able to add more qualifying years to their National Insurance record after April 5, 2016. They can do this until they reach the full new state pension amount or reach state pension age – whichever is first.
However, if the starting amount is more than the full new state pension, the part of the starting amount which is above the full sum is called a “protected payment”.
This is paid on top of the full new state pension sum.
Source: Read Full Article