In Depth

Thousands missing out on full state pension

Some people do not have the 35 years' of NI contributions needed - even if they have been in constant work

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Most new pensioners didn’t receive the full 'flat-rate' state pension in 2016. Figures released by the Department for Work and Pensions have revealed that more than 90,000 (59%) people who started claiming the state pension between 6 April and 31 August last year received less than the flat-rate.

The new flat-rate pension was introduced by the former Chancellor George Osborne who pledged at the time that it “would be simple; it would be based on contributions’ it would be a flat rate, so people know what to expect”.

Unfortunately, the majority of new pensioners in 2016 discovered they weren’t entitled to that “simple” flat-rate pension.

“The news is a blow to millions of people who might have formed the understandable impression that the new state pension would provide everyone with the same amount,” says Anna Mikhailova in The Sunday Times.

“It is particularly worrying for those approaching retirement whose income might soon be lower than they were expecting, and who have little time to sort out the problem.”

The reason so many people are missing out on the full flat-rate state pension of £159.55 a week is that in order to get it you have to have a ‘full national insurance record’. This means you have to have accumulated national insurance contributions for 35 years – up from 30 years under the old system.

If you have less than ten years national insurance contributions you will receive nothing. Anyone who has between ten and 35 years contributions will receive a proportion of the flat-rate.

Then there is a secondary issue: you may have been employed for 35 years or more, but still not get the full state pension because you spent some of those years ‘contracted out’.

Employees were sometimes ‘contracted out’ if your employer offered a company pension. If you were contracted out, you paid less in national insurance and therefore don’t have a full national insurance record.

“What the government could and should have done is try to help people understand the process of contracting out, which meant you pay less national insurance in order to build up some of your state pension in a private scheme,” says former Pensions Minister Baroness Altmann.

“First of all, nobody knew they were paying less national insurance, and they didn’t realise some of their state pension was included in their private scheme. The new state pension was mis-sold to people. If people were expecting the full £155 from the state they might be expecting more than they are going to get.”

You can check how much state pension you are forecast to get and when you can start claiming it on the government’s website. It will show you if you have any gaps in your national insurance contributions, and you can choose to make these up with voluntary contributions so that you receive the full state pension.

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