Thousands missing out on full state pension
Some people do not have the 35 years' of NI contributions needed - even if they have been in constant work
Most new pensioners didn’t receive the full 'flat-rate' state pension in 2016. Figures released by the Department for Work and Pensions have revealed that more than 90,000 (59%) people who started claiming the state pension between 6 April and 31 August last year received less than the flat-rate.
The new flat-rate pension was introduced by the former Chancellor George Osborne who pledged at the time that it “would be simple; it would be based on contributions’ it would be a flat rate, so people know what to expect”.
Unfortunately, the majority of new pensioners in 2016 discovered they weren’t entitled to that “simple” flat-rate pension.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
“The news is a blow to millions of people who might have formed the understandable impression that the new state pension would provide everyone with the same amount,” says Anna Mikhailova in The Sunday Times.
“It is particularly worrying for those approaching retirement whose income might soon be lower than they were expecting, and who have little time to sort out the problem.”
The reason so many people are missing out on the full flat-rate state pension of £159.55 a week is that in order to get it you have to have a ‘full national insurance record’. This means you have to have accumulated national insurance contributions for 35 years – up from 30 years under the old system.
If you have less than ten years national insurance contributions you will receive nothing. Anyone who has between ten and 35 years contributions will receive a proportion of the flat-rate.
Then there is a secondary issue: you may have been employed for 35 years or more, but still not get the full state pension because you spent some of those years ‘contracted out’.
Employees were sometimes ‘contracted out’ if your employer offered a company pension. If you were contracted out, you paid less in national insurance and therefore don’t have a full national insurance record.
“What the government could and should have done is try to help people understand the process of contracting out, which meant you pay less national insurance in order to build up some of your state pension in a private scheme,” says former Pensions Minister Baroness Altmann.
“First of all, nobody knew they were paying less national insurance, and they didn’t realise some of their state pension was included in their private scheme. The new state pension was mis-sold to people. If people were expecting the full £155 from the state they might be expecting more than they are going to get.”
You can check how much state pension you are forecast to get and when you can start claiming it on the government’s website. It will show you if you have any gaps in your national insurance contributions, and you can choose to make these up with voluntary contributions so that you receive the full state pension.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
'People shouldn't have to share the road with impaired drivers'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
Is academic freedom in peril?
Today's Big Question Faculty punishments are on the rise
By Joel Mathis, The Week US Published
-
Quincy Jones, music icon, is dead at 91
Speed Read The legendary producer is perhaps best known as the architect behind Michael Jackson's 'Thriller'
By Peter Weber, The Week US Published
-
The financial impact of returning to work in later life – should you 'unretire'?
The Explainer Many people return to the workplace after retirement age, but what could it mean for your finances?
By Marc Shoffman, The Week UK Published
-
State pension underpayments: are you getting the right amount?
feature Hundreds of thousands of women may have received less than they were owed
By Rebekah Evans Published
-
Early retirement: what is the ‘FIRE’ movement?
feature Younger workers are aiming to quit the workforce early through extreme saving and investment
By Rebekah Evans Published
-
How women can bridge the gender pension gap
In Depth New figures have shown the extent of the problem for women in retirement years
By Rebekah Evans Published
-
How to plug the pension gap by buying National Insurance credits
feature A temporary change in the state pension offers a ‘golden opportunity’
By Marc Shoffman Last updated
-
Are UK pensions safe?
Today's Big Question Bank of England governor says its debt market support must end – but the multi-billion-pound scheme could be extended
By Sorcha Bradley Published
-
Pensions: time to end the triple lock?
Why Everyone’s Talking About Ministers must decide whether to risk alienating older voters by ending guaranteed pension rises
By The Week Staff Published
-
Pension payback scandal: are you affected?
In Depth Retirees facing huge repayment bills following discovery of calculations blunders dating back decades
By The Week Staff Last updated