State pension payments could be reduced by private plans – full list of affected schemes
Martin Lewis discusses checking state pension underpayments
State pension payments are mainly dependent on National Insurance records, with 35 years of contributions needed to receive the full amount of £175.20 per week. However, a claimant’s starting amount can be altered if they contributed to their state pension under the old system or built up certain private pension schemes.
Starting amounts can include a deduction if the claimant was in certain:
- earnings-related pension schemes at work (such as a final salary or career average pension) before April 6 2016
- workplace, personal or stakeholder pensions before April 6 2012
If a worker was invested in these types of schemes, they may have paid lower National Insurance contributions.
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This is known as being contracted out of the additional state pension and the Government highlights this should affect most people who have been in work.
These rules were changed again in 2016 and those who were contracted out will no longer be going forward and will pay standard amounts of National Insurance.
To see if a person was contracted out at any point, they’ll need to find their old payslips and check the National Insurance contributions as they will have either the letter D or N next to it if they were contracted out.
Additionally, people can contact their employers or pension providers to get more details.
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The Government details retirees are more likely to have been contracted out if they work in the public sector, with the following being key examples of affected sectors:
- the NHS
- local councils
- fire services
- the civil service
- police forces
- the armed forces
While 35 years will be needed for full state pension amounts, they can be claimed with a minimum of 10 years.
State pensions will not be paid automatically but retirees should receive a letter form the Government no later than two months before reaching state pension age telling them what to do and expect.
Even where these letters are not received, a person will be able to claim their state pension if they’re within four months of reaching state pension age.
The quickest way to do this is to apply online but claims can also be processed over the phone or through the post.
When claimed, initial payments can take up to five weeks to arrive.
Beyond this, the payments will arrive once every four weeks into a designated account.
These payments will be paid in arrears, meaning the following four weeks will be covered, not the coming four weeks.
It is possible to receive state pension payments while still working and when a person reaches state pension age, they will no longer need to pay National Insurance but could still have other taxes levied against them.
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