The UK State Pension
Last updated: 9 October 2014
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"Different people receive different amounts based on their own individual circumstances"
UK state pensions are paid out to all UK citizens when they reach the state retirement age, providing they have paid their National Insurance (NI) contributions.
At the moment the national retirement age is 65 for men and 60 for women, however this is set to change imminently. Earlier this year the Coalition Government announced plans to speed up the rate at which pension ages increase, it is thought that the male UK pension age will rise to 66 by 2016, with the female age rising to 65 by 2020.
Different people receive different amounts based on their own individual circumstances. UK state pensions are defined by benefit levels and are made up of a number of components including:
Basic State Pension
The amount you receive through the basic UK pension is dependent on how many years you spent working in your life, these are known as qualifying years. During these qualifying years you will have paid NI contributions which go towards the pension.
Additional State Pension
Some people are also entitled to the UK additional state pension, depending on their personal circumstances. The additional state pension is also known as the State Second Pension and was previously called the SERP (State Earnings Related Pension Scheme). If you qualify for this it will be paid on top of the basic state pension. Since 2002 SERPS have given extra pension income to people who are on low or moderate wages, and also people with disabilities or long-term illnesses.
Long-term Incapacity Benefit Age Addition to State Pension
People who have been have been receiving Long-term Incapacity Benefit Age Addition at any point during the 8 week period leading up to the day they reached the state pension age will find that their UK state pension is increased.
Increased UK State Pension for Dependents
Some people may also find that they can receive a larger UK state pension for their wife, husband or civil partner. If you look after children while in your pension years you can receive more money via Child Tax Credits.
Frozen State Pensions
While all British Pensioners are entitled to receive their State Pension, regardless of where they live, the British Government "freezes" the state pension for pensioners who live in certain overseas countries. This means that depending on where you live, payments may be fixed at the the level of your first pension payment.
Not all countries are included in this "frozen" list. What may come as a suprise is that most Commonwealth countries are included in the frozen list (including Canada, Australia and New Zealand).
Typically if you live in the EEC, including Switzerland, your pension will match the level of pension payment with the UK.
In 2007 a Pensions Act was passed that brought in a number of changes to the previous UK pension system. Married women who were denied a basic UK pension due to insufficient NI contributions may now be able to receive a basic UK pension via their husbands NI contributions, this arrangement can only occur if the husband is already receiving the basic UK pension and the wife is aged 60 or older.
People who have lost a spouse may now be able to receive a basic UK pension through their late partner’s NI contributions. If your partner was at the UK pension age before October 2002 then you may also be able to receive the whole of their additional state pension when they die. If your partner arrived at the UK pension age before 6 October 2010 and they pass away before you do then you may receive between 60 and 90 % of their SERPS, with the final amount depending on when they reached the UK retirement age.
If your partner dies after reaching the UK pension age past 6 October 2010 then you may receive 50 % of their remaining SERPS. If you are divorced from your partner and cannot get a basic UK pension due to NI you may still be able to receive one based on your ex-partner’s contributions. If you continue to work after receiving the basic UK pension then your wages will not affect the pension. You can receive extra on your basic UK pension if you hold off from claiming your pension for a minimum of five weeks from the date it becomes available.
The UK State Pension and QROPS
A QROPS is an overseas pension transfer that allows you to move you pension fund offshore for potential benefits, at present you are unable to do this with a basic state pension.
Do you need clarification about your State Pension?
With the rules and regulations changing so regularly, if you're a British expat it's become very complex to understand exactly what you are entitled to and what your options are.
In some cases, British Expats are missing out on valuable income simply because its impossible for them to stay on top of all the changes.
We've created our unique State Pension Review, in partnership with advisers in our network, to help anybody who has paid UK National Insurance and no longer lives in the UK get vital information about their State Pension entitlement.