Financial Services > Pensions > State Pension

 


In general terms the State pension comes in three different layers:

1) the basic State pension
2) the State second tier pension,
formerly known as the State Earnings Related Pension (SERPS) which in turn was formerly known as the Graduated Pension . . . and
3) Pension credit

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What you receive as a basic State pension is directly related to your National Insurance record.

Your State Pension Age will depend on when you were born.  Go to https://www.gov.uk/state-pension-age to calculate your exact State Pension Age.

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The full basic State pension is payable after 30 years of National Insurance contributions (note, this is not the reduced married women's rate but the full rate of National Insurance). If you cannot build up more than 10 years before your State retirement age you will not qualify for any basic State pension in your own name, and you may be entitled to a small pension when your husband, wife or registered civil partner reaches their State retirement age by virtue of the National Insurance contributions that they paid.

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The second layer of the State pension does not apply to the self-employed but, in essence, some of the National Insurance contributions paid by you and your employer are supposed to entitle you to an increased weekly pension at the State retirement age.

No reserve has been set aside by the government to meet these obligations and, with inescapable changes to the age profile of the population looming, it was inevitable that one government would eventually have the courage to take this benefit away. This was announced in March 2011 to be effective from April 2016 at which point a 'simplified' flat rate State Pension has been proposed to replace all of the current layers. Whilst this may benefit some in our society others will lose even more.

Please contact Corrigans to discuss the impact that this may have upon you.

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The third layer of the State pension is effectively a means tested benefit - because it is only payable to those people who have insufficient private income in retirement to meet a minimum threshold set by the government from time to time.

It is really important to remember that this is unlikely to be a permanent feature because it effectively imposes a tax of 100% upon anyone with a small pension scheme. What happens in practice is that the pension credit is reduced by £1 per week for every £1 of weekly benefit that anyone is entitled to from their own pension schemes. This clearly encourages no one to save for their retirement and so it is likely to be a casualty in the next wholesale review on the topic of pensions by this or any subsequent government.