The new state pension being phased in by Theresa May’s Conservative government will alter how much people receive once they retire. It was introduced on April 6, 2016 and will be available to men born on or after April 6, 1951 and women born on or after April 6, 1953. The new rules replace the old “triple lock” pension guarantee for people who reached State Pension age before April 6, 2016. Introduced by then Prime Minister David Cameron’s coalition government in 2010, the triple lock has two main elements.
It guarantees a basic pension based on a person’s National Insurance contribution – and an additional sum based on earnings.
The triple lock promise from the government is to raise the second part either by 2.5 percent, the rate of inflation or average earnings growth – whichever is the highest.
But that is now being replaced by a single-tier state pension based on your National Insurance record only.
From April 2018, the pension will rise by average earnings growth only, which came in highest at 2.6 percent.
The government says the full new State Pension will be £164.35 per week in 2018/19, rising to £168.60 in 2019/20.
Pensioners in this category will earn a total annual income of £8,767.20, which will mean they are £221 better off a year.
People on the lower basic state pension will see a rise from £125.95 to at least £129.10, an annual rise of £163 per year.
This equates to an annual income of £6,718.40.
How is the new state pension calculated?
The amount you receive will depend on your contributions from your National Insurance record prior to 2016 – known as your ‘starting amount’.
Your starting amount is either the highest of one two things.
This is either the amount you would have received under the old system based on the basic and additional pension or the amount you would get if the State Pension was in place at the start of your working life.
The government has promised it will never be lower than the amount you would have received under the old system.
If people have less than 35 years of NI contributions, they will get a proportion based on the number of years paid.
Anyone with less than 10 years of NI will not usually qualify for any state pension.
To find out more, visit gov.uk/new-state-pension