What is the basic state pension?

The Basic State Pension is a pension that the government pays out when you've reached State Pension Age. The money to pay this pension is taken from National Insurance (NI) payments. For the 2008/09 tax year every individual gets a Basic State Pension of £90.70 per week, or £145.05 for a married couple at least one of whom is State Pension Age or older,  as long as they have made sufficient NI contributions throughout their working lifetime.

If entitled, you can get the Basic State Pension when you reach State Pension age: 65 for men and currently 60 for women. Between 6 April 2010 and 6 April 2020, the State Pension age for women will gradually be increased from age 60 to age 65.

What is the State Second Pension?

The State Second Pension (S2P) is payable to certain people depending on their salary and NI contributions. This used to be called State Earnings Related Pension Scheme (SERPS), before S2P replaced SERPS in April 2002, so if you made NI contributions before this time, you may have a mixture of SERPS and S2P benefits at State Pension age. 

For the 2008/09 tax year, in order to earn rights under the State Second Pension, you must be employed with an income of at least £4,680 and be paying National Insurance contributions. S2P also provides benefits for carers who are not in paid employment and people who are long term disabled.

Your entitlement to additional State Pension is calculated when you claim the basic State Pension.The Pension Service will normally send you the relevant forms and invite you to make a claim about four months before you reach State Pension age. For men this is 65. For women it is currently 60, but between April 2010 and April 2020, the State Pension Age for women will gradually increase to age 65.

If you don’t receive a letter inviting you to claim your pension, you can call The Pension Service on 0845 300 1084 or visit the Directgov website.

What is contracting out?

The government allows you to leave the State Second Pension (S2P) if you choose, and this is referred to as 'contracting out.' If you decide to contract out of S2P, you will no longer earn any further entitlement to S2P during that period. Instead, the government will pay part of your ongoing NI contributions (and part of those that your employer makes for you) - or 'rebates' - into a personal or stakeholder pension of your choice.

Part of these rebates will qualify for tax relief. The government will add this into the payment that they make to your plan.

If you do decide to contract out, you will not be entitled to the full State Second Pension, but you may still be entitled to part of the State Second Pension (or State Earnings Related Pension) for time in your working life that you were not contracted out. The benefits you will receive under your personal or stakeholder pension will replace those that you have given up by contracting out.

There are many issues surrounding contracting out and we strongly recommend that you seek financial advice before making a decision.

The Government introduced Pension Credit in October 2003.  Pension Credit is an entitlement for people aged 60 or over, and guarantees a minimum level of income. This could mean extra money for you every week.

For the 2008/09 tax year, it guarantees everyone aged 60 and over an income of at least:

• £124.05 a week if you are single
• £189.35 a week if you have a partner

And it’s worth knowing that the Government is rewarding those aged 65 and over for some of their savings they have made for their retirement. If you have modest savings you may still qualify for Pension Credit.

For more information on whether you’re eligible for Pension Credit, visit the government’s Pension Service website.

If you want to know how much you can expect from your state pension in the future, the Government’s state pension forecast can help you to decide whether you are currently saving enough for your retirement needs.

The state pension forecast tells you in today's money values:

• the amount of state pension you have earned already
• the amount of state pension you can expect at state pension age based on what you have earned already and what you might earn before you reach state pension age.

If you decide to register online and view your pensions forecast details, you will need to have the following information, if applicable:

• your date of marriage or civil partnership
•  the National Insurance number of your ex spouse/civil partner or late spouse/civil partner and their date of birth
• your date of divorce, dissolution of civil partnership, widowhood or death of civil partner
• the dates of birth of your child or children
•  the amount of any Industrial death benefit you get.

To get your state pension forecast, please use the following link:

State pension forecast