State Pension: What is a protected payment on State Pension?
State Pensions will rise in 2020 and millions might see more money in their accounts as a result. Express.co.uk has compiled a guide to advise you about the new State Pension and specifically what the State Pension protected payment is and how it operates.
The State Pension is a regular payment given to recipients by the government later in life.
The State Pension was first introduced in 1909 and around 500,000 people aged 70 and above were paid five shillings (25p) a week.
Considering inflation that amount would equate to around £28 per week in today’s money.
Throughout the 111 years, the State Pension has existed, it has been subject to modifications many times.
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In April 2016, the State Pension underwent a massive overhaul.
In particular, changes were made to the age at which you can start claiming your pension.
Previously women received the State Pension at aged 60 and men at age 65, but in 2016 the State Pension age for women was increased to 65.
If you were already receiving your State Pension before 6 April 2016 nothing will have changed, you will continue to receive it under the old rules.
Another key change to the State Pension in April 2016 was that it is now based upon your National Insurance record alone.
For the tax year 2019 to 2020, the full new State Pension amount is £168.60.
This year, State Pensions will increase as part of the Government’s triple lock system which was launched in 2011.
The triple lock system ensures the basic State Pension amount rises based on one of three amounts: 2.5 percent each year, the rate of inflation or average earnings growth.
When the rates change in 2020, those on the new state pension will see their weekly allowance increase to £175, an increase of £6.58 per week as of April 2020.
For those on the basic state, pension will see their weekly allowance increase to £134 which is an increase of £5.04 per week.
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What is a protected payment?
The old State Pension was made up of a basic pension plus an additional pension linked to earnings.
The new State Pension is a single flat rate pension plus any “protected payments”.
Your protected payment is the part of your starting amount which is above the full new State Pension and is paid on top of the full new State Pension.
Key features of protected payment
There are two special features of this protected payment which affect annual upratings and the ability to pass on part of your pension to a surviving spouse or civil partner.
The amount of your state pension up to the full flat-rate amount is uprated in line with government policy and at least by the growth in average earnings.
But the protected payment is uprated in the same way that SERPS pensions are uprating and is generally in line with price inflation, currently measured by the Consumer Price Index.
This means different elements of your state pension will be uprated by different amounts.
The new State Pension was created on the principle of individuals building up pensions in their own right, if someone receiving a protected payment were to die, their surviving spouse or civil partner would be entitled to inherit 50 percent of their protected payment as an addition to their weekly state pension.
You are entitled to inherit half a partner’s protected payment once you start claiming your own State Pension if your marriage or civil partnership began before April 6, 2016 and the following apply:
They reached or would have reached State Pension Age on or after April 6, 2016
They died on or after April 6, 2016.
It is also possible to inherit a deferred protected payment.
If a spouse or civil partner reached State Pension age before April 6, 2016 and they received extra State Pension because of deferring, you may inherit some of their extra State Pension once you start claiming your own State Pension.
To be eligible for this payment both of the following must apply:
You were married or in a civil partnership when your partner died
You did not remarry or form a new civil partnership before you reached State Pension age.
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