Basic State Pension
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The Basic State Pension is one part of the United Kingdom's Government pension arrangement, alongside Graduated Retirement Benefit and State Earnings-Related Pension Scheme scheme (now State Second Pension).
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[edit] Introduction
Basic State Pension is a "contribution based" benefit, and depends on an individual's National Insurance (NI) contribution history. For someone with the full number of qualifying years (years in which NI contribution was paid - typically 44 for a man and 39 for a woman,[1] although this reduces to 30 years on 6 April 2010[2]), it is payable at a flat rate of £95.25 per week (2009/10). Less pension is paid for someone with fewer qualifying years. An "Age Addition" was introduced in 1971, with 25p per week added to the State Pension for people aged 80 or over. It remains at this level.
The table shows how the basic state pension for singles and married couples has changed between 1996 and 2009.
| Year | 1996–7 | 1997–8 | 1998–9 | 1999–00 | 2000–1 | 2001–2 | 2002–3 | 2003–4 | 2004–5 | 2005–6 | 2006–7 | 2007–8 | 2008–9 | 2009-10 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Single person | £61.15 | £62.45 | £64.70 | £66.75 | £67.50 | £72.50 | £75.50 | £77.45 | £79.60 | £82.05 | £84.25 | £87.30 | £90.70 | £95.25 |
| Married couple | £97.75 | £99.80 | £103.40 | £106.70 | £107.90 | £115.90 | £120.70 | £123.80 | £127.25 | £131.20 | £134.75 | £139.60 | £145.05 | £152.30 |
| CPI adjusted single | £82.72 | £81.90 | £82.04 | £83.36 | £81.88 | £86.42 | £88.52 | £88.25 | £88.08 | £88.28 | £87.86 | £87.30 | £90.70 | £95.25 |
| CPI adjusted couple | £132.22 | £130.89 | £131.11 | £133.26 | £130.88 | £138.15 | £141.51 | £141.07 | £140.80 | £141.17 | £140.53 | £139.60 | £145.05 | £152.30 |
The Basic State Pension is indexed each year for those pensioners living in the UK and also for 535,000 pensioners living in certain overseas countries. However 525,000 pensioners living in certain other overseas countries have their pensions frozen at the rate at which they are first paid. This may be seen as discriminatory because all of the pensioners have paid in the same contributions to the National Insurance Fund which pays out all pensions.
[edit] State Pension age
State Pension age is presently 60 years for a woman and 65 years for a man.
From 6 April 2020, the State Pension age will be equalised at 65 for men and woman. The change will be phased in by gradually increasing women's State Pension age over a ten year period between 6 April 2010 and 6 April 2020.
This will not affect women born on or before 5 April 1950, who can still claim their State Pension at 60. Women born on or after 6 April 1955 will have an SPA of 65. Women born between 6 April 1950 and 5 April 1955 will have an SPA of between 60 and 65.[3]
The Pensions Act 2007 will have the effect of raising State Pension age from 65 to 68 over a 22 year period between 6 April 2024 and 5 April 2046.[4]
It is possible to defer claiming the SRP at pension age. Deferring claiming in this way gives an enhancement of 1% for every 5 weeks the pension is not claimed (approximately 10.4% per year), or a lump sum and an unenhanced pension. The lump sum is the amount not claimed plus interest at 2% over the Bank of England's base rate.[5]
[edit] Calculations
The Basic State Pension is based on the entire UK National Insurance record of the individual. Depending on the age of the claimant, the calculation may be split in to two parts, one for the National Insurance record prior to 1975 and one for the National Insurance record post-1975, and the resulting figures combined to give the complete entitlement.
[edit] Prior to April 6, 1975
Every contribution paid or credited between April 6, prior to the 16th birthday (or date of entry to the UK system if later) and April 5, 1975 is totalled up.
This figure is then divided by fifty to give the number of qualifying years earned towards the Basic State Pension. If this number is greater than the number of years between the April 6 prior to the 16th birthday and April 5, 1975, the number of years is capped at this figure.
This calculation is repeated for each tax year between April 6, 1975 prior to the date of entry in to the UK National Insurance system (if later) and the last complete tax year on record (or the April 6, 1975 prior to State Pension Age, if earlier).
Once the number of qualifying years has been calculated the amount of Basic State Pension can be calculated.
The first step is to find the number of years needed for a full Basic State Pension, this depends on the sex and date of birth of the person claiming the pension.
Once the number of qualifying years has been found, it is compared to the number of years needed for a full Basic State Pension and the resulting figure calculated as a percentage of the full Basic State Pension. At present, a man needs 44 qualifying years for a full Basic State Pension and a woman needs 39 years. For a minimum Basic State Pension, a man needs 25 percent, or eleven years and a woman needs 26 percent or ten years.
[edit] Married couples
A wife can claim extra Basic State Pension based on the National Insurance contributions paid by her husband. If the wife has a Basic State Pension of less than sixty percent of her husbands, then when he reaches State Pension Age, she is able to have her Basic State Pension topped up to sixty percent of his Basic State Pension without him losing anything from his record.
From the 6th April 2010, a man will be able to claim an increase based on the number of contributions paid by his wife
[edit] See also
- Graduated Retirement Benefit
- Pensions Credit
- State Earnings-Related Pension Scheme
- State Second Pension
- Pension provision in the United Kingdom
