DWP State Pension warning as millions forced to live on less than full amount

Millions of people claiming a State Pension are forced to get by on less than the full amount, new figures show. Around 12.6 million people are drawing a State Pension, with the majority of 9.4 million on the old Basic State Pension that was on offer before April 2016 and others on the New State Pension introduced for anyone retiring after that date.

At present, the maximum paid in Basic State Pension is £156.20 per week (£8,122 a year) and the maximum New State Pension is £203.85 per week (£10,600 a year). These amounts will go up in April to £169.50 per week (£8,814 a year) and £221.20 per week (£11,502 a year) respectively.

A petition has recently called for the New State Pension to be lifted far higher to £549.12 per week. But it transpires that millions aren’t even getting the standard full amounts that are currently available.

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Lord Sikka asked the House of Lords how many people on the Basic State Pension and New State Pension don’t receive the full amount. In a written response, Viscount Younger of Leckie said that the latest figures showed that, as of the quarter ending May 2023, there are 2,350,493 people in receipt of the pre-2016 Basic State Pension who do not receive the full amount. This represents a quarter (25 per cent) of the pre-2016 State Pension population.

In addition, there are 1,670,257 people in receipt of the post-2016 New State Pension who do not receive the full amount. This represents almost half (49 per cent) of the post-2016 new State Pension population. The two figures add up to just over four million people receiving a lesser retirement sum.

Viscount Younger of Leckie went on to explain: “There are a range of reasons for why an individual may not get the full rate of State Pension as the amount of State Pension paid to individuals varies depending on their National Insurance record.

“In addition to the Basic State Pension (pre-2016), people may also receive some earnings-related Additional State Pension. For most individuals reaching State Pension age in the early years of the New State Pension (post-2016), transitional arrangements apply. Under these arrangements, people could have a State Pension of more or less than the full rate of the New State Pension depending on their National Insurance record when they reach State Pension age.

“It is also possible that some of these people may qualify for income-related benefits such as Pension Credit and Housing Benefit.”

DWP statistics show that the average weekly amount paid to those on the Basic State Pension is £178.67 for men and £152.90 for women, indicating that many male pensioners are likely to be getting some Additional State Pension (also known as the State Second Pension or SERPS) on top to take it above the full basic payment.

Meanwhile, the average weekly amount for those on the New State Pension is £175.54 for men and £170.61 for women, both below the standard full amount. Overall, taking both types into account, the average State Pension payment is £166.13 a week.

The DWP says the introduction of the New State Pension has “evened out some of the gap between the average weekly payments for men and women, as women tend to get more under the new rules than under the pre-2016 rules.”

What are the rules for getting a full State Pension?

New State Pension (for anyone who reaches retirement age after April 6, 2016)

You usually need 35 qualifying years of National Insurance contributions or credits to get the full amount of the New State Pension. You need at least 10 qualifying years on your National Insurance record to get any State Pension at all. They don’t have to be 10 qualifying years in a row, the DWP said.

You will get a proportion of the New State Pension if you have between 10 and 35 qualifying years. If some of the years were under the old rules before April 6, 2016, this will be used to calculate your starting amount. It will be the higher of either:

• the amount you would get under the old State Pension rules (which includes Basic State Pension and Additional State Pension)
• the amount you would get if the New State Pension had been in place at the start of your working life

Your starting amount will include a deduction if you were contracted out of the Additional State Pension. You may have been contracted out because you were in a certain type of workplace, personal or stakeholder pension.

If your starting amount is less than the full New State Pension, you can top it up until you reach that level or are of State Pension age – whichever is first. On the other hand, if your starting amount is more than the full New State Pension, the part above that level is called a protected payment and will be paid on top of your New State Pension.

Those who had no National Insurance contributions or credits before April 6, 2016, will receive an amount calculated entirely under the New State Pension rules. Remember you need 35 years to get the full amount and 10 to receive any State Pension at all. So, for instance, if you have 20 qualifying years on your National Insurance record after April 5, 2016, then divide the current maximum amount of £203.85 by 35 and then multiply by 20, meaning your new State Pension will be about £116.48 per week.

Basic State Pension (for anyone who reached retirement age before April 6, 2016)

To get the full basic State Pension you need a certain number of qualifying years of National Insurance.

If you’re a man you usually need:

• 30 qualifying years if you…