How millions on state pension won’t get extra £471 a year from April
MILLIONS on a state pension are set for a smaller pay rise than expected from next month when rates are hiked.
The state pension goes up annually based on whatever is highest out of 2.5%, inflation or wages – known as the triple lock.
From next month, it is rising by 4.1%, based on wages.
However, there are two types of state pension that are worth different amounts based on your age, meaning annual rises vary.
Those on a full basic state pension, currently worth £169.50 a week, will see a smaller rise than those on the full new state pension, currently worth £221.20.
Rates for these two types will go up by £6.95 and £9.07 a week and £361.37 and £471.62 a year, respectively.
It means older pensioners on just the old-style state pension with no additional amounts will get £110.25 less a year from next month.
That said, those on the old state pension can still get more than £169.50 a week if they qualify for additional state pension.
For example, those that were part of the State Earnings-Related Pension Scheme (SERPS), which ran between 1978 to 2002.
Caroline Abrahams CBE, charity director at Age UK said: “Many people believe that all pensioners receive the same amount of state pension, but that’s not the case.
“Only pensioners in receipt of the full rate of the new state pension will receive the maximum increase in their state pension this year.
“This means around one in four (3.1m) pensioners in Great Britain will receive the maximum increase in their State Pension in April 2025, and conversely three in four (9.8m) pensioners will receive less than this amount.”
What are the different types of state pension
The basic old-style state pension is paid to women born before April 6, 1953 and men born before April 6, 1951.
The new state pension is for females born on or after April 6, 1953 and males born on or after April 6, 1951.
The maximum basic state pension is currently worth £169.50 a week but the new state pension is worth £221.20 per week.
However, these are only the full amounts you can receive for either type of state pension and you may get less.
You qualify for the full new state pension if you have 35 qualifying years of National Insurance (NI) contributions.
Meanwhile, you will need 10 NI years to get any new state pension.
You need a minimum 30 NI years to qualify for the full amount of basic state pension.
How to boost your state pension and how to get help
There are two main ways you can boost your state pension if you’re not set to have enough to live on.
The first is by deferring it.
If you’re set for a new state pension, it increases for each week you push back receiving it, by the equivalent of 1% for every nine weeks.
This works out at just under 5.8% over 52 weeks (a year).
That means someone set to receive £200 in new state pension would get an extra £11.60 for deferring for a year – £211.60.
Those on the old state pension can increase it by deferring as well, with you getting a 1% rise for every five weeks of push back, working out as 10.4% for every 52 weeks.
So, if you were set to receive a £150 basic state pension and deferred it for a year, you would get an extra £15.60 a year – £165.60.
The other main way to boost a state pension is by topping up your NI years, but you’ll have to pay to fill them.
It can be worth it in the long-run though, as it will see what you can earn from your state pension boosted massively over the years.
If you fill gaps between 2006/07 and 2015/16, you’ll pay the 2022/23 rates for contributions.
It is worth £15.85 a week, which means it costs £824.20 to buy one year of contributions.
As the state pension was £185.15 per week in 2022/23, this boost would add £5.29 per week or around £275 per year.
Although you’d have to pay £8,242 (10 lots of £824.20), the annual state pension boost would be around £2,750.
Someone who was retired for 20 years would get back around £55,000 in total (before tax).
Anyone under 73 can make voluntary pension contributions, as it’s assumed everyone under this age will claim the new state pension.
Find out how to pay for your contributions by visiting www.gov.uk/pay-voluntary-class-3-national-insurance.
Before making a voluntary contribution, check if the gaps in your contributions can be filled with free NI credits.
Thousands are thought to be missing out on these credits, like those on certain benefits that should qualify for Class 1 credits.
This includes parents with active claims for child benefit.
If you’re worried about your future state pension income, you can talk to a number of charities who offer free advice and tips too, like Age UK.
You can contact its advice line on 0800 678 1602, 8am to 7pm 365 days a year.
Or you can visit the charity’s website on www.ageuk.org.uk/money.
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you're self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You’ll usually pay National Insurance Contributions (NICs) when you’re over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 – so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you’re not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don’t need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self-assessment tax return.