State pension: Starting amount calculation revealed – check your initial payment

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STATE pension payments are based on a person’s National Insurance record. A minimum of 10 years of contributions will be needed to receive any amount while 35 years is required for the full amount.

State pension can currently pay a full amount of £175.20 per week and this amount will rise each year under the triple lock system. These rules affect the “new” state pension which was introduced in 2016 but as to be expected, there may be some overlap between the old and new systems calculations.

As such, a person’s National Insurance record before April 6 2016 is used to calculate their “starting amount”, which is part of their new state pension.

The starting amount will be the higher of either:

  • The amount that the person would get under the old state pension rules (which includes basic state pension and additional state pension)
  • The amount that the person would get if the new state pension had been in place at the start of their working life

The starting amount will include a deduction if the person in question chose to “contract out” of the additional state pension in their working life.

This could have happened if the person involved was in a certain type of workplace, personal or stakeholder pension.

The starting amount may be lower than the full new state pension but retirees do have options to try and increase their payments.

People can increase their state pension payments by adding more qualifying years to their National Insurance record after April 5 2016.

This can be done until the person reaches the full new state pension amount or reaches state pension age.

The government detailed that each qualifying year on a National Insurance record after April 5 2016 will add about £5 a week to their payments.

To work out the exact amount awarded, the person involved will need to divide £175.20 by 35.

They will then need to multiply this by the number of qualifying years after April 5 2016.

Once a person reaches state pension age and starts getting their payments, they can expect to see their income increase every year.

Under triple lock rules, state pensions will increase by the highest of:

  • Earnings – the average percentage growth in wages (in Great Britain)
  • Prices – the percentage growth in prices in the UK as measured by the CPI
  • 2.5 percent

People can get a state pension forecast at any time before they actually reach state pension age.

The government provides a free-to-use forecasting service which can help people find out how much they could get, identify when they can claim it and see if they could increase it.

This tool can be found online but there is an option to get a forecast through a postal application using a BR19 application form.

Another option for increasing state pension is through deferral, which will increase the payments by the equivalent of one percent for every nine weeks of deferment.

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