Pre-6 April 2016
Last autumn, I published a number of blog entries to help explain how the old system worked. Through this entry, which focusses on the period up to 5 April 2016, I want to show how people may have paid different amounts of NI over their working life through to the end of the tax year 2015/16, and how this has contributed to the State Pension they are or will become entitled to.
In October 2015, we launched the State Pension top up scheme, giving everyone reaching State Pension age before 6 April 2016, the chance to boost their long-term income by up to £25 a week.
Blog 4 showed how the past changes to the Additional State Pension mean that you could have built up several different parts of State Pension. Your Additional State Pension will depend on a large number of factors.
So far, I’ve just explained how your State Pension builds up at the moment, based on NI you are paying or credited with this year. But your eventual State Pension will depend on your past NI record, as well as what you are building right now.
Being “contracted-out” generally means that you are paying lower National Insurance rates than the standard full rate for employees. You will be paying lower National Insurance as you are opted out of State Second Pension (S2P).
I want to try to help you understand how the State Pension works – both under today’s rules and in the future.
I will start by explaining the current State Pension.