Can you delay taking your state pension to get the higher rate? What happens if you don’t have 35 years of National Insurance?
The government’s plans to reform the state pension and introduce a flat rate pension (they prefer to call it a ‘single tier pension’) are a bit clearer now they’ve published the White Paper. But only a bit. Lots of you have got in touch with questions about how the new state pension might work. Here are some of the popular questions.
The Pensions Minister, Steve Webb, confirmed on 19th March that the flat rate state pension would be introduced on April 6th 2016, not 2017 as announced. You can read the House of Commons statement.
Q. I’m due to retire before April 6th 2016. Can I delay taking my state pension until after then to get the higher rate?
A. No, I’m afraid you can’t. It doesn’t work like that. The key date is when you reach state pension age (that’s the date you become entitled to receive your state pension). It’s not the same as the date you take your state pension – because you can delay taking it – or the date you reach 65 or the date you stop work.
SAVVY TIP: Currently you can defer your state pension and either get a higher weekly pension or a lump sum. Under the plans for a flat rate state pension, you won't be able to take a lump sum.
Q. When do I have to be born in order to get the new flat rate state pension?
A. It depends on whether you’re a man or a woman and when the flat rate state pension is introduced. At the moment, the government has said it won’t be introduced before April 6th 2016 at the earliest, but it could be introduced after that (or possibly not at all if the new government isn’t committed to it).
• If you’re a woman, you won’t qualify for the new flat rate state pension unless you’re born on or after 6th April 1953.
• If you’re a man, you’ll receive the flat rate pension if you’re born on or after 6th April 1951.
SAVVY TIP: Quite a few of you have emailed me to say it’s unfair that women and men with the same date of birth will receive different pension amounts. The reason is that women’s state pension age is rising from 60 to 66 from 2010 to 2018, while men’s is rising from 65 to 66. I’m trying to find out what – if anything – the government may do about this. In the meantime, I’d recommend that you email your MP. You can find the name of your MP by using the Parliament website.
Q. I’ve only got 30 years of National Insurance contributions and I’m due to retire after 2017. I’m not working at the moment. Should I buy extra National Insurance?
A. In theory it’s probably a good idea to buy extra National Insurance so you’ll be entitled to the full flat rate pension. However, Malcolm McLean, a pensions consultant at Barnett Waddingham says it’s probably better not to do anything just yet. “Buying voluntary National Insurance contributions is a good deal, but the government say it may give people longer to buy the extra five years. So I’d advise waiting until we get some clarity.”
UPDATE - 22ND JAN I've had an email from the Department for Work and Pensions today which says that the government plans to give people who reach state pension age after 2017 until 2023 to buy National Insurance from tax years 2005/06 to 20015/16.
SAVVY TIP: The rate you pay for a year’s worth of National Insurance varies according to the year you’re buying it for (currently you can generally only go back six years and buy extra NI). This year (2012/13) a year’s NI costs just under £700. For that, says Tom McPhail of Hargreaves Lansdown, you’d get an extra £200 in pension (it works out at £4 a week).
Q. I’m due to get my state pension after April 2016. At the moment I’ve got more than £144 because I’ve paid into SERPS and the state second pension. What will I get?
A. Assuming the flat rate state pension is introduced on 6th April, the Department for Work and Pensions will look at the pension you’ve built up under the current system and what you’d be entitled to under the flat rate pension. You’d then be entitled to keep the better of the two. That would be the basis on which you’d carry on building up your state pension in the future.
Q. My mum is due to retire after 2016 but she was going to rely on my dad’s National Insurance record for her pension. I’ve heard she won’t be able to do that. What will she live on?
A. You’re right that women (and men) won’t be able to rely on their spouse or civil partner’ National Insurance record to increase their own state pension after the flat rate scheme has been introduced. However, your mum will be able to use your dad’s National Insurance record for the years up to April 5th 2016.
If she works between April 2016 and when she retires – or acts as a carer – she will be able to pay National Insurance or get NI credits. She would then receive a state pension based in part on her husband’s National Insurance record and in part on her own under transitional arrangements.
SAVVY TIP: If your mum had been due to retire before 2016 and your dad would have retired after April 2016, she would still have been able to claim a pension based on his National Insurance, even though his state pension date wasn’t until after April 2016. Sorry if this is complicated, but the government hasn’t exactly made it easy!
Q. I’ve paid the married women’s stamp. I’m due to retire in 2018. How am I affected?
A. If you’re due to reach state pension age on or after 6th April 2016 and you’ve paid the married women’s stamp – even if only for a week, says Malcolm McLean – you’ll be able to claim a state pension of 60% of the basic state pension.
The government's plans to raise the state pension age - when will you get yours?
Deferring your state pension - what are the options?
How can you increase your state pension?
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