Entitlement to the state pension is contingent on having sufficient “qualifying years”. These are tax years for which you have a paid a minimum level of NIC or received NIC credits.
People who reach the state pension age on or after 6 April 2016 need 35 qualifying years in order to receive the full single-tier state pension – set at £164.35 per week for 2018/19. Those with less than 35 qualifying years, but at least ten qualifying years, will receive a reduced state pension, reflecting the number of qualifying years. Anyone who has less than ten qualifying years is not eligible for the new state pension.
There are various ways to build up qualifying years. The main way is via the payment National Insurance contributions. There are three classes of contributions that build pension entitlement:
- Class 1 for employees;
- Class 2 for the self-employed; and
- Class 3, which are voluntary contributions.
Employees need earnings at least equal to the lower earnings limit (£116 per week for 2018/19, rising to £118 per week for 2019/20), so they can build up a qualifying year. Those with earnings between the lower earnings limit and the primary threshold (£162 per week for 2018/19, £166 per week for 2019/20), can get a qualifying year for free, as they are deemed to have paid notional contributions.
Checking your state pension forecast can be done easily online on the gov.uk website. The tool will tell you what you will get now on current rates and also what you will get at your state pension date (again at current rates) on the assumption that x more years are paid by that date. A state pension forecast can also be requested by post by completing form BR19.