New State Pension is born
April 6th 2016 saw brand new retirees receiving their state pension under the new flat rate system. The new pension regime is designed to offer simplicity and clear up the mess that had resulted from tinkering by governments of various persuasions over many years.
The result is that any individual who has accumulated 35 years of National insurance contributions or credits will receive the full pension of £155.65 per week. There will be no complicated income related formulas thus doing away with the two tier system that existed previously. Those that have between 10 and 34 years NI record will qualify for a reduced amount.
Nice and simple then! The only problem is that when governments and civil servants are involved nothing is simple. There is no doubt that the system will become the simple one tier flat pension in the future but in the short term many will not receive anything like the headline amount. I credit the Which? website for the following explanation:
People might get more or less than the indicated full new state pension (eg their starting amount). Those that have built up a certain amount of additional state pension will get a higher amount, while those that were contracted out before 6 April 2016 for a significant time will probably get less.
This figure will be whatever is higher - either the amount you would get under the old system or the amount you would get had the new system been in place over the whole of your working life.
Exactly what you'll get, which is based on your National Insurance record, will be no less than the amount you'd have received on the last day of the old scheme (5 April 2016). This assumes you have the minimum number of years on your National Insurance record to get any state pension (10 years).
Nice and simple then!