The basic State Pension is a regular payment from the government that you receive when you reach State Pension age. To receive it you must have paid or been credited with National Insurance contributions.
The most you can currently receive is £107.45 per week
(in 2012 to 2013).
The basic State Pension increases every year by whichever is the highest:
• earnings – the average percentage growth in wages
(in Great Britain)
• prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
• 2.5 per cent
Additional State Pension
The Additional State Pension is an extra amount of money that you could receive with your basic State Pension. It’s also based on your National Insurance contributions.
How much you receive depends on your earnings and whether you’ve claimed certain benefits. There is no fixed amount like the basic State Pension. You receive the Additional State Pension automatically, unless you’ve contracted out of it.
The Additional State Pension is paid with your basic State Pension. It normally increases every year by prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI). There is no fixed amount for the Additional State Pension.
How much you receive depends on:
• how many years of National Insurance contributions
• your earnings
• whether you’ve contracted out of the scheme
Once you’ve reached State Pension age and are claiming the basic State Pension you’ll automatically receive any Additional State Pension you’re eligible for. There is no need to make a separate claim.
You will not receive the Additional State Pension if you’ve contracted out of it. If you only contracted out for certain periods, you’ll receive a reduced amount.
The Additional State Pension is made up of two schemes. You might have contributed to both, depending on how long you’ve been working.
The main difference between the two schemes is that since 2002 you also contribute to the Additional State Pension if you’re claiming certain benefits.
The State Second Pension since 2002
You contribute towards your Additional State
Pension through your National Insurance contributions when you’re:
• employed and earning over the lower earnings limit of £5,564 a year (in 2012 to 2013)
• looking after children under 12 and claiming Child Benefit
caring for a sick or disabled person more than 20 hours a week and claiming Carer’s Credit
• working as a registered foster carer and claiming
• receiving certain other benefits due to illness or disability
You’re not eligible if you’re:
• employed and earning less than £5,564 per year
• in full-time training
Contracting out of the Additional State Pension
You can only contract out if your employer runs a contracted out pension scheme, so you’ll need to check this with them. If you’re a member of a contracted out occupational workplace pension you don’t contribute to the Additional State Pension for the time you belong to the scheme.
This means that when you retire you either don’t receive any Additional State Pension or it might be reduced, depending on how long you contracted out. You and your employer pay lower National Insurance contributions while you contract out. When you retire, you’ll get a pension from your employer’s scheme.
To contract out you must be:
• earning at least the lower earnings limit of £5,564 a year (in 2012 to 2013)
• paying Class 1 National Insurance (or treated as paying them – check with your employer)
Different rules apply if you’re a member of a salary-related pension scheme before 6 April 1997. These rights, known as the ‘Guaranteed Minimum Pension’, can’t be taken before age 65 (men) or 60 (women). The Guaranteed Minimum Pension will continue to be paid at these ages even when the State Pension age rises.