Millions of pensioners WON’T see State Pension rise by full £473 next year despite triple lock – how to top up your pot
MILLIONS of pensioners will see their weekly state pension payments rise next year after the Chancellor confirmed it will increase by 4.1% next year.
As a result more than 12 million pensioners will receive up to an extra £470 per year.
But the exact amount you will receive will depend on whether you receive the old version of the benefit or the new full state pension.
The state pension increases every year in order to keep pace with the rising cost of day-to-today items such as food and household bills.
It will rise next April under the triple lock guarantee.
The triple lock promises that each year the state pension will be put up in line with whatever is highest of wages for May to July, 2.5% or September’s inflation figure.
Employee wages grew by 4.1% in the three months to July, while the UK’s rate of inflation was 1.7% in September.
That means that the state pension will rise by the earnings figure.
New state pension
It has been confirmed that the state pension will increase from £221.20 a week to £230.30.
Over the course of a year this would take payments from £11,502 to £11,975 – a £473 increase.
But only those who receive the full new state pension will get this amount.
To get the full state pension, you need to have 35 years of national insurance contributions.
Only half of people who claim the new state pension received the full amount last year, according to Royal London.
Retirees on the new state pension who have more than 10 years of contributions but less than 35 years will see their payments increase by less.
They will still get the 4.1% boost but the total amount of state pension they will get will continue to be lower.
For example, someone with just ten years of national insurance contributions or equivalent credits would get around £63.20 a week.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
This adds up to £252.80 a month – or £3,033.60 a year.
When their state pension increases by 4.1% in line with the current earnings data then their payments will rise to £65.79 a week.
Each month they would get £263.16
Per year this works out at £3,157.92 – a difference of £124.32.
You can check your national insurance record on gov.uk.
To calculate how much state pension you would receive, divide £221.20 by 35 then times it by the number of years of contributions you have.
Old state pension
If you are a man who was born before April 6, 1951 or a woman born before April 6, 1953 then you will get the old state pension.
If you were born on or after these dates you will receive the new state pension instead.
The old state pension pays £169.50 a week.
Each month that adds up to £978, or £8,136 over the course of a year.
When it rises by 4.1% next year the monthly payments will rise to £176.45 a week or £705.80 a month.
Each year it will pay £8,469.58 – a difference of £333.58.
To get the full old state pension you also need a certain number of qualifying years of national insurance.
If you are a man you usually need 30 qualifying years if you were born between 1945 and 1951.
If you were born before 1945 then you need 44 qualifying years.
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - Final salary pension – This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year upon retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
- New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
- Basic state pension – If you reach the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.
Meanwhile, if you are a woman you usually need 30 qualifying years if you were born between 1950 and 1953.
If you were born before 1950 then you will need 39 qualifying years.
Additional state pension
Many people who get the basic state pension also qualify for additional state pension.
This is extra money on top of the old state pension payment.
To qualify you must be a man born before April 6, 1951 or a woman born before April 6, 1953.
There is no fixed amount you will get from the additional state pension.
How much you will receive depends on:
- How many years you paid national insurance on your earnings
- Whether you were contracted out of the scheme
- Whether you topped up your basic state pension (this was only possible between October 12, 2015 and April 5, 2017
The additional state pension is made up of three schemes.
You may have contributed to more than one depending on:
- How long you have been working
- Whether you chose to top up your state pension
You may be eligible for the second state pension if you were employed or claiming certain benefits from 2002 to 2016.
Or you may be entitled to State Earnings-Related Pension Scheme (SERPS) if you were employed from 1978 to 2002.
Finally, you could be entitled to State Pension top up if you reached the state pension age before April 6, 2016 and opted in between October 12, 2015 and April 5, 2017.
You do not need to apply to claim the additional state pension.
If you are eligible for it you will automatically get it when you claim your state pension.
The amount you are given should also rise by 4.1% from next April.
How to top up your state pension
Claim missing credits
You may be able to fill in gaps in your national insurance record for free by claiming missing credits.
You may have earned them even though you were not paying national insurance because you were claiming benefits while you were ill or unemployed.
If you are eligible you may get credits automatically or you have to apply for them.
You may be eligible for missing national insurance credits if:
- You are looking for work
- Ill, disabled or on sick pay
- On maternity, paternity or adoption pay
- A parent or guardian
- You are a carer
- Grandparent or other family member caring for a child
- On working tax credit
- On universal credit
- On a training course
- On jury service
- The partner of a person in the armed forces
- Wrongly imprisoned
Make voluntary contributions
If you have gaps in your national insurance record you can also top them up by paying voluntary contributions.
You can usually pay voluntary national insurance contributions for the past 6 years.
The deadline is April 5 each year.
If you want to make voluntary contributions for the 2016-17 or 2017-18 tax year then you have until April 5, 2025 to pay.
You can sometimes pay for gaps from more than 6 years ago, depending on your age.
If you are a man born after April 5, 1951 or a woman born after April 5, 1953 then you can make up for gaps in your record from further back.
You have until April 5 to pay voluntary contributions to make up for gaps between tax years April 2006 and April 2016 if you are eligible.
After April 5 you’ll only be able to pay for voluntary contributions for the past six years.
You can check your national insurance record here.
There are two types of national insurance contributions – class 2 or class 3.
The type of voluntary contribution you are eligible to pay depends on whether you were employed or self-employed, the amount of money you earned and if you receive benefits.
For the 2024-5 tax year voluntary class 2 contributions cost £3.45 a week, while voluntary class 3 contributions cost £17.45 a week.
If you want to fill gaps in your record from previous years you will pay the rates that were set during that tax year.
Defer when you claim it
Another option to increase the amount you will receive each week from the state pension is to defer when you claim it.
The amount you will get in the state pension will increase every week you defer, as long as you defer for at least nine weeks.
Your state pension increases by the equivalent of 1% for every nine weeks you defer.
This works out as just under 5.8% for every year.
The extra amount is paid with your usual state pension payment.
For example, if you are entitled to the full new state pension of £221.20 a week but you defer for a year you will get an extra £12.82 a week when you claim it.
This example assumes that there is no annual increase in the state pension.
You do not get your state pension automatically and need to claim it.
You should get a letter no later than two months before you reach state pension age, which will tell you what to do.
If you want to defer, you do not have to do anything as your pension will be automatically deferred until you claim it.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories