Retirement Pension (The State Pension)

The State Pension is paid to people reaching the qualifying age. At present this is 60 for women and 65 for men, but this will be equalised (see section below). The State Pension consists of the following elements:

• Basic pension,
• Additional pension (also known as SERPS or State Second Pension),
• Graduated Retirement Benefit,
• Long-term Incapacity Benefit Age Addition,
• Age addition, and
• Extra pension for dependants.

Basic State Pension

The basic State Pension is dependent on National Insurance Contributions having been paid or credited. If you have not paid or been credited with sufficient contributions, you may have a chance to pay extra contributions to increase your entitlement. If you do not pay this extra, the basic pension is scaled down proportionately to the shortfall in your contributions.

If you have not paid or been credited with any contributions, you are not entitled to any State Pension, until you reach the age of 80. If you have not been employed or earning because you were bringing up children, or looking after a dependent relative, you may apply for Home Responsibilities Protection. This effectively reduces the number of years over which you were expected to make contributions, so that the full basic pension may be payable with a reduced number of years’ contributions.

A married woman who does not qualify for the full basic State Pension based on her own contributions can receive the full basic pension based on her husband’s contributions provided that:

• the husband is getting a basic pension, and
• the wife is aged at least 60.

 

A widow or widower may be able to get the basic pension and up to 50% of the additional pension based on their deceased spouse’s contributions.

• A widow or widower may also get 100% of their deceased spouse’s SERPS or Additional State Pension when the spouse dies, if they reached State Pension age before 6 October 2002.
• If they reached State Pension age between 6 October 2002 and 5 October 2010, the maximum SERPS or S2P inherited by the widow or widower is between 90% and 100%.
• If they reach State Pension age after 5 October 2010, the widow or widower will receive a maximum of 50% of the SERPS or S2P.

 

A divorced person who does not qualify for full basic pension based on his or her contributions may be able to get the full basic pension based on their former spouse’s contributions.

The basic State Pension is not affected by any earnings from working after your retirement date. However, a dependant’s earnings will affect your extra pension for dependants (see below).

If you or your dependant spouse are in hospital for 52 weeks, the pension will be reduced.

The pension is still payable if you go to live abroad.

Additional State Pension

This is an addition to the basic pension and is dependent on earnings related National Insurance Contributions paid by employees (known as Class 1 contributions). From 1978 until 2002, these additional contributions were called the State Earnings Related Pension Scheme (SERPS). From 2002, they were known as State Second Pension (S2P).

For Class 1 National Insurance purposes, your earnings are classified into three tiers – the lower tier (up to the minimum level at which NI is charged), the middle tier (where earnings are subject to NI contributions), and the upper tier (where employers – but not employees – pay at a higher rate). The earnings related contributions are calculated by reference to the middle tier. The benefit is also based on the middle tier earnings.

Self employed people do pay Class 4 contributions, which are earnings related, but these do not qualify for any additional pension.