I'm in ill health but not claiming benefits - can I get NI credits towards a state pension? Agony Uncle Steve Webb replies
I am a 61 year old male with 42 qualifying years towards my state pension. I stand to have quite a big deduction from my state pension due to having been in a company pension scheme most of my working life.
Three years ago I left work due to ill health and now receive a company pension. Although not able to work full time I still do a casual, zero hour, job to supplement my pension until I reach state pension age at 66.
I have read that NI credits can still be claimed towards qualifying years due to pension changes after April 2016.
State pension: Can you get credits towards it if you are in ill health but don't qualify for benefits?
I do not qualify for any 'out of work' benefits due to my company pension and have read that I must be claiming some type of benefit to claim NI credits.
So my question is, in my situation can I claim NI credits for the remaining years until I reach my state pension age?
SCROLL DOWN TO FIND OUT HOW TO ASK STEVE WEBB YOUR PENSION QUESTION
Steve Webb replies: In order to find out where you stand at the moment, the first thing to do is to get an up-to-date estimate of the state pension you have built up so far. You can do this by visiting the new government website here.
The way that the new state pension system works is that you will be given a figure for your rights as at April 2016 called a ‘starting amount’.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
The Government will look at the pension you had built up under the old rules (your basic state pension plus any earnings-related ‘SERPS’ pension) and at the pension you would get under the new rules (a full flat rate pension of £155.65 for 35 years of contributions, less a deduction for the period when you were in a company scheme and paying reduced National Insurance).
The starting amount will be the higher of these two numbers.
The significance of this is that the new state pension makes a big deduction from the ‘flat rate’ figure for the period when you were in a company pension, whereas under the old rules the deduction is generally smaller than this. So when your starting amount is calculated, it is likely to be on the basis of the old rules.
I haven’t seen your individual figures but I would assume you have got a full basic state pension of just over £119 per week and then probably a few pounds per week of earnings-related pension on top, perhaps for years that you worked when you were not in the company scheme.
You are right that any years of NI contributions or credits post April 2016 can boost your pension significantly. Each extra year will add 1/35th of the full flat rate of £155.65 or around £4.45 per week to your pension.
HOW MUCH IS THE NEW STATE PENSION?
People retiring from April 2016 onwards can qualify for the full new 'flat rate' of £155.65 a week, but many have discovered they will end up with smaller payments.
This is because they contracted out of paying the additional state pension top-ups S2P and Serps and under-paid National Insurance during their working lives.
Steve Webb has explained and defended the new state pension in a previous This is Money column here.
If you were off sick and claiming Employment Support Allowance then you would indeed get credits towards your state pension for as long as you satisfied the rules of the benefit in terms of not being fit for work, attending medical assessments etc.
You have written that you are not entitled to ESA because of your occupational pension. However, if you are not fit for more than a bit of casual work you should still claim ESA.
The reason for this is that even if you are turned down on income grounds, provided that you satisfy the other conditions for benefit then you can still get National Insurance credits.
This is known as a ‘credits only’ award and over a hundred thousand people are currently getting credits towards their pension through this route without actually receiving a penny of ESA.
Finally, if for any reason you do not go down this route, the other option would be top up your National Insurance record through voluntary contributions.
BOOSTING YOUR STATE PENSION
Steve Webb explains more about how to buy state pension top-ups and fill gaps in your National Insurance record here.
You have mentioned that you are on a zero hours contract and do some paid work. If there are weeks in the year when you earn enough to pay National Insurance then these contributions would give you a part year towards your pension. When you reach pension age you could choose to top up those contributions to make them into a full qualifying year.
Because the rate of voluntary NI contributions is set by the Government at a subsidised rate, if you had any spare cash at that point you would probably get a very good return by using it to boost your pension. You can find more about paying voluntary NI contributions here.
ASK STEVE WEBB A PENSION QUESTION
Former Pensions Minister Steve Webb is This Is Money's Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Since leaving the Department of Work and Pensions after the May 2015 election, Steve has joined pension firm Royal London as director of policy.
If you would like to ask Steve a question about pensions, please email him at email@example.com
Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
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