What are the main sources of income?
This module considers the financial factors that the member needs to take into account when making decisions on pension benefits, we will look at:
First of all we will look at the main income sources.
New State Pension
The New State Pension replaced the Basic State Pension (BSP) and State Second Pension (S2P) on 6 April 2016. A man is eligible to receive it if he was born after 5 April 1951 and a woman if she was born after 6 April 1953.
It is contributory benefit, and eligibility to partial benefit is dependent on having paid (or been credited with paying) Class 1 National Insurance contributions for at least ten years.
A contribution history of at least 35 years is necessary to receive the benefit at its full rate.
In 2017/18, the full rate for the New State Pension is £159.55 per week.
It is paid from State Pension Age (SPA) and the current position is shown in the table below:
| Date of Birth | State Pension Age |
| 6 December 1953 to 5 October 1954 | 65-66 |
| 6 October 1954 to 5 April 1960 | 66 |
| 6 April 1960 to 5 March 1961 | 66-67 |
| 6 March 1961 to 5 April 1977 | 67 |
| 6 April 1977 to 5 April 1978 | 67-68 |
| After 5 April 1978 | 68 |
Previously SPA depended on whether the member was male or female.
| Males born before 6 December 1953 | SPA = 65 |
| Females born before 6 April 1950 | SPA = 60 |
| Females born between 6 April 1950 and 5 December 1953 | SPA = 60-65 on a sliding scale |
For example a female born on 6 January 1953 has an SPA of 62 years 10 months.
The New State Pension can be deferred which may be particularly useful if the member is continuing to work. During deferment it will increase by 1% for every 9 weeks. This equates to 5.8% for each year it is left.
Unlike deferring the Basic State Pension (see below) there is no alternative one-off lump sum option.
In payment, the New State Pension is increased annually according to the provisions of the ‘triple lock.’ This means that the annual increase will be the greatest of:
State Pension Age before 6 April 2016
Members who attained State Pension Age before 6 April 2016 were not entitled to the New State Pension described above but were instead entitled to the Basic State Pension (BSP) and the Additional State Pension.
The BSP was paid to everyone but the amount varied depending on the number of years the member paid National Insurance Contributions (NICs). In order to have received the maximum amount, the member must have paid NICs for 30 years. The most a person can currently (2017/18) get is £122.30 per week.
The Basic State Pension can be deferred which may be particularly useful if the member is continuing to work. During deferment it will increase by 1% for every 5 weeks. This equates to 10.4% for each year it is left (a greater rate of increase than is now applied to the New State Pension). If the member doesn’t claim it for 12 months then they can chose to receive a one-off lump sum which will include interest at 2% above the Bank of England base rate.
Additional State Pension
The Additional State Pension, unlike BSP, depended to some extent on a member’s earnings. Unless the member was contracted-out, they would have contributed to:
Schemes could contract out of both these schemes in return for a reduction in employers’ and employees’ NI contributions. Members of contracted out schemes did not accrue benefits under the Additional State Pension Scheme, they were provided with the equivalent pension under their employer’s scheme instead.
State Benefits
Other State benefits that the member may receive include Pension Credit which is made up of two parts:
There is also:
Members can find their SPA and obtain quotes for the New State Pension and Pension Credits they may be eligible for online at www.gov.uk or by telephoning 0800 731 7898 for help making a claim or telephoning 0345 3000 168 to get a State pension forecast.
Other Sources of Income
The individual may have income from personal financial arrangements such as:
