I think most people are probably aware what the State Pension is but are probably less familiar with the rules on qualifying for the State Pension.
Just in case you don’t know what the State Pension is, let me explain briefly. When you reach the State Pension retirement age (which is set by law) the government will pay you a pension income for the rest of your life. This pension has nothing to do with your own pensions you have set up yourself or through an employer, it is a statutory benefit.
All sounds good so far, finally the government actually giving back eh? Well not quite. The State Pension is only paid to those that qualify.
So what are the rules on qualifying for the State Pension
This is where it gets slightly tricky because we actually have two types of State Pension in operation at the moment:
- The Basic State Pension.
- The New State Pension.
The Basic State Pension is the older version and is only payable to people who reached their State Pension age by 6th April 2016. The New State Pension is payable to people who reach their State Pension retirement age after 6th April 2016.
State Pension Retirement Age – You don’t actually have to retire at the State Pension retirement age. You can carry on working and receive a State Pension at the same time although be careful you don’t pay too much Income Tax.
You can check your State Pension age online.
To qualify for either version of the State Pension you will need to have paid or been credited with National Insurance contributions.
The Basic State Pension:
- 30 years worth of National Insurance contributions for the full Basic State Pension.
The New State Pension:
- 10 years worth of National Insurance contributions for any sort of New State Pension.
- 35 years worth of National Insurance contributions for the full New State Pension.
If you qualify for the minimum level but not the full by the time you reach State Pension age, your State Pension will be paid proportionately.
National Insurance is usually deducted from your wages similar to Income Tax. If you’re self employed you usually pay it as part of your tax return. You will receive ‘credits’ for the years you were a parent or carer and therefore didn’t work.
There’s actually a misconception that the National Insurance contributions you pay go towards paying your future State Pension. This is incorrect as they actually go towards paying the State Pension for today’s pensioners.
At least when you do reach State Pension age you no longer pay National Insurance.
How to check if you are qualifying for the State Pension
The key points you need to know are the age at which you are due to receive your State Pension and the number of qualifying years you need.
Luckily the government have made it super easy to find out where you stand. You can apply online for what’s called a State Pension Forecast.
This will tell you what your future State Pension is likely to be and how many qualifying years you have built up so far. Essential knowledge when planning your retirement.
When you receive this information, if you find you are behind with qualifying years there may be the opportunity to ‘purchase’ additional years. Get in touch with us if you need some assistance.