Why won't I get the full flat-rate state pension?

Chris Torney / 22 September 2015

Many people eligible for the new state pension will not receive the full amount. We look how contracting out of SERPS could affect the amount you receive.

A new state pension system comes into effect next April promising a ‘flat rate’ payment of around £150 a week*.

The new pension replaces the complicated current system of basic state pension – this year, it is worth £115.95 a week – plus any entitlement to the earnings-linked state second pension (S2P, previously SERPS) and the means-tested pension credit.

But in fact, many people eligible for the new pension will receive less – in some cases significantly less – than the full £150. (*The exact ‘full’ amount that the pension will pay is to be announced in the autumn.)

Will the new state pension be unfair to women?

Who gets the new pension?

If your state pension age falls on or after 6 April 2016, you will come under the new system. 

Men who were born before 6 April 1951 and women born before 6 April 1953 will reach state pension age before this date and will get their state pension under current rules.

Will I be entitled to the full amount?

How much pension you get after next April is likely to depend on whether you spent any years “contracted out” of S2P or SERPS.

In the past, individuals have had the option of having some of their National Insurance contributions channelled into their company pension. The advantage of this was that the money would, in theory, grow within the pension to provide a greater level of retirement income – but people who contracted out in this way would get a lower level of S2P from the government when they reached state pension age.

Those who contracted in, on the other hand, would get no boost to their private pension but would be entitled to more state pension when they retired.

At present, many people are asking the government for pension forecasts to see how much they will be entitled to under the new system.

But a significant proportion of those who contracted out at some point in their working lives – even if it was for a relatively short period of time – are discovering they will get less weekly pension under next year’s system than they expected.

Is it worth deferring your state pension to boost your retirement income?

How can I find out what I will get?

If you are due to reach State pension age in the first 10 years of the new system, you can request a pension forecast – this applies to women born between 6 April 1953 and 5 June 1960 and to men born between 6 April 1951 and 5 June 1960. To do so, call the Future Pension Centre on 0345 3000 168 or request a statement online on this government website.

Did you know that you can top up your state pension? Find out more...

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