State pension

The basic State Pension is paid when you reach the state pension age. The amount you get depends on the number of years you've paid - or been treated as paying - National Insurance contributions

Each year, if you are working, and earning more than a set amount, part of your income is deducted as National Insurance contributions (NICs). If you work for a company, your employer also pays NICs. Part of your NICs goes towards paying for the State Pension.

Men need to pay NICs for 44 years to get a full basic State Pension. Women, who reach 60 before 2010, need to pay them for 39 years. But the State Pension age for women will change gradually between 2010 and 2020 from 60 to 65, so the number of years women need to pay NIC's to get a full State Pension will gradually increase to 44 too.

State Pension and any other state benefits:

When do I get my State Pension?
You can claim your State Pension when you reach state pension age. For men, this is 65. For women, it is currently 60, but from 2010 to 2020 will gradually increase so it is 65 too. You can delay taking the pension for a few years if you don't need the income. As a result you will be paid a higher amount.

How much is the State Pension?
In 2003/04 the full basic State Pension is £77.45 a week for a single person and £123.80 a week for a couple.

Second State Pension
You may also qualify for an additional State Pension. This is known as the State Second Pension (S2P), and is payable to employees - but is not currently payable if you are self-employed. It was introduced in April 2002 (when it replaced the state earnings related pension scheme known as SERPS). Call the State Pension Forecasting team on 0845 300 0168 for a forecast of what you may be entitled to from the state.

I'm self-employed how can I boost my pension?
Most self-employed people will qualify for at least some of the Basic State Pension, however if you are self-employed you won't qualify for a Second State Pension or SERPS (although there are plans being developed to allow the self-employed to contribute to the Second State Pension).

To boost your pension income you may want to think about taking out a private pension of some sort. Some of your options may include taking out a Personal Pension and/or a Stakeholder Pension. The Pension Service has a downloadable guide to pensions for the self-employed. For more information visit www.thepensionservice.gov.uk

Is there any extra cash I can claim?
You may be able to get extra money from the state, if you - or your partner - are aged 60 or over. The government has set a minimum level of income - known as the Minimum Income Guarantee - and if the money you have coming in does not reach this amount, it will be topped up.

This Minimum Income Guarantee is becoming part of the new Pension Credit (introduced in October 2003), which is designed to give pensioners a minimum level of income and to provide extra cash to those with small incomes from savings. From October 2003, every pensioner will be guaranteed a minimum income of £102.10 a week, or £155.80 a week for couples. In addition they will get a credit for any savings or pensions they have built up. To make a claim for the Minimum Income Guarantee you can call 0800 028 11 11.

What pension am I entitled to?
To find out your entitlement, call the State Pension Forecasting Team on 0845 300 0168. You can also write to them at: State Pension Forecasting Team, Room TB001, Tyneview Park, Whitley Road, Newcastle upon Tyne NE98 1BA

Can I leave the State Pension scheme and have a Private Pension instead?
You can't leave the basic State Pension, but in some circumstances you can decide to leave the State Second Pension this is known as 'contracting out'. If you decide to contract out of the State Second Pension there are two main options for you.

You can join a pension scheme run by your employer - this is also known as a Company Pension or Occupational Pension. You will pay lower National Insurance Contributions as a result.

You can join a Personal Pension or Stakeholder Pension. A rebate of National Insurance contributions, equivalent to the amount paid towards State Second Pension will be invested in your pension plan.

Before deciding to contract out of the Second State Pension, you should take advice. Speak to an Independent Financial Adviser (IFA) or a Specialist Pensions Adviser.