State Pension Factsheet
26 AUGUST 2020
The State Pension while seemingly small is a valuable part of your ongoing financial planning.
The current full new state pension payment amount is £175.20 per week (£9,141.69 pa or £761.81 pm in 2020/21) and people retiring now will have a state pension age of around 66. However, your state pension age will be different based on your date of birth and your qualifying years of National Insurance Contributions (NIC’s).
To give the value of the State Pension some context, if you were to purchase a standard annuity at age 66 to match the escalating benefits offered using August 2020 annuity rates, you would need a private pension value of around £293,216. This obviously demonstrates the value of the state pension that provides you with a secured income in your retirement, especially when you consider this amount is doubled when a couple both qualify for the full new state pension.
In most cases, if you have in depth questions about your state pension, our advice is to contact the pension service directly as they are often the only port of call to find the information you need. However, we have produced a short guide to assist you when considering your state pension entitlement below.
The Old and New State Pension
The full New State pension is £175.20 per week (2020/21) and is based on 35 full years of qualifying NIC’s (National Insurance Contributions).
The minimum amount of UK qualifying years is 10 complete years to receive a state pension, but you should check this with the Department of Work & Pensions (DWP) as some benefits, such as being a carer or even working abroad, may entitle to you to additional years of NIC’s.
The Old State Pension was based on 30 full qualifying years. However, there have been several different regimes and many rule changes relating to the basic state pension and additional state pension over the years.
Where you qualify for both the new state pension and under older state pension rules, the pension service will carry out a calculation on your behalf to determine which benefit is of higher value. They will then use the higher sum so a person will receive the highest state pension benefit possible. This does mean it is possible that older benefits that have been built up over time will provide a higher starting state pension.
Obtaining a State Pension Forecast
We recommend that all clients obtain a state pension forecast and you can apply online at https://www.gov.uk/check-state-pension . This is now how over 99.5% of requests are received as this is the most efficient way to obtain your record.
Alternatively, you can apply via post to obtain your state pension forecast and the BR19 form can also be found online at https://www.gov.uk/government/publications/application-for-a-state-pensionstatement
Your completed state pension forecast will allow you and City Asset Management to look at any gaps in your National Insurance records and this will help you to consider what actions (if any) can be taken to improve your state pension.
Topping up your State Pension
Your state pension forecast will also provide a breakdown of each applicable tax year. This will include records of incomplete years and will help you examine the most efficient way to top up your pension benefits if this is required.
Generally, when considering topping up your state pension, you may wish to consider the following:
• Topping up part years first as these are often cheaper than the alternative methods;
• Continuing to work and paying NIC’s (at either Class 1 for the employed or Class 2 (or Class 2&4) for the self-employed; and
• Class 3a voluntary contributions are also available to top up until 5th April 2023.
Contracting Out Pension Equivalent (COPE)
You may notice references to COPE in your pension forecasts.
A handy guide is now contained within your state pension forecast, but I have included the link in the resources and links section below.
You should always check directly with the Department of Work & Pensions if you have any queries relating to your records.
Contacting the State Pension service
You must contact the pension service in order to start claiming your state pension and further links and contact details are included below and in the useful links section at the bottom of this document.
Telephone: 0800 731 7898
https://www.gov.uk/contact-pension-service
or contact the Future Pension service on telephone number 0800 731 0175
Your state pension is based on a variety of different regimes and rules and whilst we would always advise that you contact the pension service directly, we have also included links to further reference material below which may assist you.
Other Useful Links
• The basic state pension https://www.gov.uk/state-pension
• The additional state pension https://www.gov.uk/additional-state-pension
• Contracted out of the state pension https://www.gov.uk/contracted-out
• The new state pension https://www.gov.uk/new-state-pension
• Check your National Insurance record https://www.gov.uk/check-national-insurance-record
• Contracted Out Pension Equivalent (COPE) - https://www.gov.uk/government/publications/state-pension-fact-sheets
• How to claim your state pension https://www.gov.uk/get-state-pension
• Delaying or deferring your state pension https://www.gov.uk/deferring-state-pension
• Planning your retirement step by step https://www.gov.uk/plan-for-retirement
• Advice on if you live or have lived abroad https://www.gov.uk/international-pension-centre
• In order to write to the Pension service, you can find your local pension centre here https://www.gov.uk/find-pension-centre
• After a death https://www.gov.uk/after-a-death
• Death of a spouse https://www.gov.uk/death-spouse-benefits-tax-pension/pensions
Other Resources
• ‘Which’ State Pension Guides https://www.which.co.uk/money/pensions-andretirement/state-pension
• ‘Age UK’ State Pension Guides https://www.ageuk.org.uk/information-advice/moneylegal/pensions/state-pension/
• Money Advice Service State Pension Guide https://www.moneyadviceservice.org.uk/en/categories/state-pension-and-benefits
David Bethell
Chartered Financial Planner FPFS
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