How have I earned a £212-a-week state pension after less than 35 years?

I am quite perplexed with the situation in which my National Insurance record shows my forecast state pension in November 2023 as £212 weekly despite my current full contribution years being 31.

My understanding is that to be eligible for full state pension, you must have at least 35 years of qualifying experience. 

So I’ve been thinking about topping up my gap years with Class 3 NI Contributions.

State pension: How have I earned a £212 a weekpayment after only 31 years?

However, after contacting Future Pension Centre about the matter, they advised me not to waste my money since I already have the maximum weekly forecast.

Please, could you shed light on the subject?

SCROLL DOWN FOR STEVE’S DIRECTIONS YOURQUESTION ABOUT PENSION    

Steve Webb replies: Although the new state pension is often described as a ‘flat rate’ pension, it will take a while before most people who retire get exactly the standard flat rate amount.

We get a lot of letters from people who are querying why they are getting less than the flat rate (often to do with having been in a ‘contracted out’ pension at some point), so it is nice to hear from someone who is set to get more than the flat rate.

Steve Webb: How to ask former Pensions Minister questions about retirement savings.

Actually, people can get a forecast higher than the current flat rate for many different reasons.

Your specific case will be addressed first. I will also address other possible scenarios where people might receive higher state pensions.

You may be familiar with two components of the older state pension. It was available to people who were born before 6 April 2016.

They were the basic state pension, which was based upon 30 years’ National Insurance Contributions and credits. There was also an earnings-related state retirement pension commonly known as SERPS.

The current rate of the basic state pension is £137.60, but the SERPS amount depends on your individual circumstances.

It can be anything between zero and a maximum of around £180 per week, depending on your workplace pension arrangements

When the new state pension was introduced, it would have been very unfair to those – such as yourself – who had already built up pension rights in excess of the flat rate figure if your state pension had suddenly been cut.

For this reason, transitional rules were introduced which allowed you to ‘lock in’ the state pension you had built up under the old rules as at April 2016 where this was above the standard flat rate, though not to add to it.

To give some figures, if you already had 30 or more years of NI contributions by 2016 you would have got a full basic pension worth £137.60 in today’s money. Suppose you had also built up just under £75 of SERPS pension on top of this.

Then your combined basic and SERPS pension earned by 2016 would be £212 per week in today’s money. Rather than pay you the new flat rate of £179.60, you will instead get £212.

In short, your pension in effect depends on the ‘old system’ rules, even though a new system has been introduced.

It is obvious that paying additional voluntary contributions to the government would not be an efficient use of your time.

Contributions from years prior to 2015/16 will not count toward your basic old-style pension. If you’ve already satisfied the requirement to have 30 years of contributions by this point you cannot boost your basic pension any further.

You must also pay Class 3 National Insurance Contributions within 6 years. This means that you cannot fill years prior to 2015/16.

– Contributions for years from 2016/17 onwards don’t help because you’ve been ‘locked in’ at the 2016 calculation (apart from annual revaluation for inflation since then).

Transitional rules permit you to receive more than the flat-rate but do not allow for an increase to that higher rate.

For completeness it is worth mentioning a couple of other situations in which people might find themselves on more than the standard ‘flat rate’ amount.

The first is that – as discussed in my previous column – you can inherit state pension from a late spouse and this is added to your new state pension figure. This can increase your standard rate.

The second situation would be if you ‘defer’ taking your state pension. The rate of your pension increases by 5.8% for every year you postpone.

I’ve had a look at the latest government figures, and it is surprisingly common for people to get more than the standard flat rate amount.

More than 450,000 people, representing more than half of the 1.7 million who are eligible for the state pension, appear to be receiving more than the flat rate. This is more than one-fourth of the total recipients.

As time goes by, people will get less or more of the flat rate.

Transitional rules like the one you have used have been in place to help us transition from one system into another.

They are intended to prevent the unjust taking of your pension that you have already saved.

Incidentally, I often hear from people who retired under the old system, and because the old basic pension is £137.60 a week believe those who retire later are treated more favourably because they may qualify for the current standard flat rate of £179.60 per week.

However, in most cases, the people on the lower sum who retired before 2016 receive less than £179.60 because they didn’t build up any SERPS, or only a small amount on top of their basic state pension, usually because they were contracted out or were self-employed. This column explains more about this topic.