How does your NI record impact your state pension? | Personal Finance | Finance

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It is important people know where they stand in terms of their retirement income, and ensure they are getting the most money they possibly can. Future retirees should be aware of what they need to do to qualify for the full state pension.

The amount of state pension people can get is based on each individual’s National Insurance (NI) record when they reach state pension age.

The new full state pension is worth £179.60 per week, which adds up to £9,339.20 each year.

The new state pension applies to anyone who retired, or who will retire, on or after April 6, 2016.

Britons usually need at least 10 qualifying years on their NI record to get any state pension under the new rules.

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Someone’s starting amount will include a deduction if they were contracted out of the ‘Additional’ state pension. A person may have been contracted out if they were part of a certain type of workplace, personal or stakeholder pension scheme.

People may find that their starting amount is less than the full state pension, but the good news is that they will be able to add more qualifying years from after April 5, 2016 to increase their entitlement.

This can be done until someone reaches the full new state pension amount or reaches state pension age, whichever comes first.

Each qualifying year on an NI record after April 5, 2016 is worth around £5.13 per week to someone’s state pension entitlement.

The exact amount a person will get on top of their starting amount is calculated by dividing £179.60 by 35, which is the number of qualifying years needed in order to get the new full state pension, and then multiplying by the number of qualifying years they have after 5 April 2016.

It is possible for some people to get more than the new full state pension, if their starting amount is higher than £179.60.

This is called a ‘protected payment’ and means people maintain their entitlement to more than £179.60.

However, these people will not be able to add any further qualifying NI years to their record.

For people who did not start work until after April 5, 2016, calculating their state pension will be more straightforward.

They will need 10 years of NI contributions to get any new state pension, and will need 35 years in order to get the full amount.

Anyone who has more than 10 years of contributions but less than 35 will get a proportion of the new state pension, relative to exactly how many qualifying years are on their NI record.

The exact amount they can receive will be calculated by dividing £179.60 by 35, then multiplying by however many years of NI contributions they have racked up.





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