Why thousands of pensioners WON’T see State Pension rise by full £460 next year

PENSIONERS are in for a windfall next year, as weekly State Pension payments are due to rise by around 4%.

But how much extra you’ll get in pounds and pence depends on whether you receive the old version of the benefit or the newer full state pension.

How much will the state pension increase by next year?

Increases to the State Pension are determined by something called the Triple Lock, which was introduced by the Conservative and Lib Dem coalition government in 2010.

It promises that each year, payments will go up by the higher of:

• Inflation, according to the Consumer Prices Index (CPI)
• Average wage increases 
• 2.5%.

This year, preliminary figures from the Office for National Statistics, show that earnings increased by 4% in the relevant month (which is July).

By comparison, the September inflation figures came in at around 2.2%, significantly lower than earnings growth.

That means that state pensions should rise by the earnings figure. However, the final decision will be made by the Work and Pensions Secretary, usually around the time of the Autumn Statement, which is on October 30.

If the official earnings or inflation figures are revised, the amount the state pension increases by could also change.

For people on the new state pension

Currently, the new full state pension is £221.20 a week, which works out as £11,502.40 a year.

If pension payments do go up by 4%, that means weekly payments will go up to £230.05 a week, which works out as £11,962.50 a year.

That’s an increase of just over £460 per annum. However, that number only applies to people who get the full new state pension. 

To get the full state pension, you need to have 35 years of national insurance contributions. 

If you’re only getting some of the new state pension, for instance because you have less than 35 years of NI credits but more than 10, then your payment increase will be less. You’ll still get a 4% uplift, but the total amount will continue to be lower.

For instance, someone with just 20 years of National Insurance contributions or credits would get around £126.40 a week. Per year, that works out as £6,572.80.

If that increases by 4% in line with the current earnings data, then it will rise to £6,835.71. So, someone would be better off by just under £263 a year. 

You can check your national insurance record on gov.uk. To calculate what state pension payment you’d receive, divide £221.20 by 35 and then multiply that by the number of years of contributions you expect to have. 

For people on the old basic state pension

If you’re a man born before 6 April 1951 or a woman born before 6 April 1953, you’ll get the basic state pension instead. 

This currently pays just £169.50 a week, which adds up to £8,814 a year. If it’s boosted by 4%, the annual payments would rise £9,167.60 – which is an increase of over £353.

To get the full basic State Pension you still need a certain number of qualifying years of National Insurance.

If you’re a man, you usually need:

• 30 qualifying years if you were born between 1945 and 1951
• 44 qualifying years if you were born before 1945

If you’re a woman you usually need:

• 30 qualifying years if you were born between 1950 and 1953
• 39 qualifying years if you were born before 1950

If you don’t have enough qualifying years, then your basic State Pension will be less than £169.50 per week. 

If you qualify for additional state pension

Lots of people who get the basic state pension, also qualify for the additional state pension. This is extra money on top of the basic payment.

To qualify you need to be either:

• a man born before 6 April 1951
• a woman born before 6 April 1953

There is no fixed amount and how much you get depends on your national insurance record, your income, and whether you contracted out of the schemes.

But NI Direct says that the maximum amount anyone can get is £218.39 per week, not including the state pension top up. This means that between your basic state pension and your additional payments, you could be getting significantly more than the new full state pension. 

The Additional State Pension is made up of 3 schemes, and you might have contributed to more than one of them.

For instance, you might have been eligible for the State Second Pension if you were employed and earned over a certain threshold or claimed certain benefits between 2002 and 2016. 

Equally, people could choose to top up their basic State Pension between 12 October 2015 and 5 April 2017. If you did this, you will get some additional state pension.

Finally, those people who were employed between 1978 and 2002 may have benefitted from the State Earnings-Related Pension Scheme (SERPS).

You do not have to do anything to claim the Additional State Pension. If you’re eligible, you’ll automatically get it when you claim your State Pension.

Whatever amount you’re given should also rise by 4% from next April.