Flat-rate pensions: clearing up the confusion

It appears to be a straightforward concept, but the new state pension regime does, in fact, throw up a few complications.

From 6^th April 2016, anyone who reaches state pension age is entitled to the new flat-rate payment. While the concept implies that all pensioners will receive the same amount of money under the scheme, things aren’t quite that simple. The sum paid out will depend on how many NI qualifying years you’ve accrued, as well as the number of years of entitlement to the additional state pension you’ve built up.

There’s something else to take into account too. You may have ‘contracted out’ from full entitlements for a period, if you were in a salary-related workplace pension or NI rebates went into a personal pension plan.

Here are some answers to frequently asked questions:

Who qualifies for the flat-rate pension?

If you don’t have a contribution record under the current system, you will have to gain 35 years of NI credits to qualify for the flat-rate payment. If you’ve already built up contributions, however, these will of course be taken into account.

What is meant by the ‘starting amount’?

The government has established transitional provisions which mean that your NI record prior to 6^th April 2016 will be used to calculate your ‘starting amount’ for the new system. This will be either the amount you would get under the current state pension rules (including basic and additional state pension) or, if it is higher, the amount you would get if the new state pension had been in place when you started working.

Is it possible to get a forecast?

Yes. In some cases, this can be done online, although you may have to make the request by post. Click here to find out more.