Your Pension Options

Basic State Pension

You can build up rights to the basic State Pension if you pay, are treated as having paid, or are credited with, National pensions contributions.

From April 2000, you can be treated as having paid National pensions contributions if your earnings fall between the lower earnings limit and the primary threshold (£3,900 and £4,615 a year in 2002/03). ‘Credited ‘ means that the Government has added some contributions to your National pensions record for you.

The years during which you build up your rights to the basic State Pension are called ‘qualifying years ‘. The amount of pension you receive depends on the number of qualifying years built up before you reach State Pension age. You can ‘t choose to stop contributing to (contract out of) the basic State Pension.

If you are a man, you need 44 qualifying years to get a full (100 per cent) basic State Pension. If you are a woman who will reach the age of 60 before 2010, you need 39 qualifying years. However, when the State Pension age becomes 65 for both men and women (this is being gradually introduced from 2010 and will be in place by 2020), the number of qualifying years that a woman needs will increase to 44.

Some people do not get a full (100 per cent) basic State Pension because they have not paid enough contributions. They may only have worked for a few years, or they may have had earnings below a certain level (the lower earnings limit).

Married women who have chosen to pay a lower rate of National pensions contributions will not have built up any basic State Pension from the time that they chose to pay the lower rate.

Other state support

The Government will be introducing Pension Credit in October 2003. This will replace the Minimum Income Guarantee. Pension Credit will provide a guaranteed level of income, like MIG, but unlike MIG, Pension Credit will reward those people who have put aside modest amounts for when they retire. This will include those who have contributed to additional state pensions, occupational pensions and those who have put aside modest amounts of capital for their retirement. People who receive MIG will automatically be transferred to Pension Credit. They will not have to take any action.

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