06 April 2017

Your new state pension update for 2017

There was very little tinkering with the state pension in this year's spring budget, with a 2.5% rise as guaranteed by the 'triple lock' promise. The new flat-rate state pension was introduced in April 2016, designed to simplify the state pension system.

You'll get it if you're a man born after April 6, 1951, or a woman born after April 6, 1953. It's calculated only on your National Insurance contributions (NICs). You need 35 qualifying years of NICs to qualify for the full new state pension, with a minimum of 10 years' contributions to qualify for any pension at all. 

Qualifying years don't have to be paid consecutively and you can 'buy' some missing years voluntarily. Each year of NICs adds £4.45 a week to your pension, based on current prices. You get a state pension even if you have a company or private pension, though you may have to pay tax on some of it if your total income is more than your annual personal allowance. 

The earnings-related part of the old state pension for employed people, called the Additional State Pension, isn't part of the new state pension system. But if you reached state pension age before April 6, 2016, you'll still receive a state pension under the old rules.  

That means a basic state pension plus top-ups for some people, like pension credits for low-paid workers, or an Additional State Pension (formerly known as SERPS). The basic state pension for 2016-17 is £119.30 a week, rising by £3 to £122.30 for 2017-18.

Winners and losers?

The government says in the first 15 years' of the new system, 75% of people reaching pension age will get a higher pension than they would have through the old basic state pension. This will decline to around half by 2050, with an equal number losing out.

In general, people born before 1980 are likely to get more from the new system, and people born after will lose out, based on a retirement age of 70.

The state pension age is going up

The state pension age for men is currently 65 and, until a few years ago, women could claim a pension at 60. From April 2017, the age that women can claim will go up to 63 years and nine months. By November 2018, the pension age will be the same for both: 65.

After that, the state pension age for men and women will rise at the same rate: up to 66 by October 2020, and 67 by April 2028. The government can review the state pension age every five years.

Changes to private pensions

After being cut dramatically in recent years, the 'annual allowance' for private pension contributions is £40,000 for 2017-18, and the 'lifetime allowance' will be £1 million. The Money Purchase Annual Allowance – the amount you can save into a private pension you have already 'flexibly accessed' – drops from £10,000 to £4,000 in April.

To find out your individual date when you qualify for the state pension, visit the gov.uk website and use the tool to check .

Wondering how big your state pension pot is? You can also check your National Insurance record and how much your weekly state pension payment will be via the state pension checker on the same site.

Of course, there are many other ways you can save for retirement on top of your state pension. All employers now offer an auto-enrolled workplace pension and you can also save through your own private pension.

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