New State Pension: glossary
Updated 6 April 2016
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This publication is available at https://www.gov.uk/government/publications/new-state-pension-glossary/new-state-pension-glossary
This publication is withdrawn
We published this information to help explain the introduction of the new State Pension from 6 April 2016. We do not plan to update it.
An explanation of words and phrases used in guidance about the new State Pension.
Additional State Pension
The earnings-related part of the State Pension that was introduced in 1978. This was known as the State Earnings Related Pension Scheme (SERPS) between 1978 and 2002, and the State Second Pension (S2P) from 2002. It forms part of the State Pension under the old rules but will not form part of the new State Pension award.
Assessed Income Periods (AIPs)
This is a part of Pension Credit. AIPs are periods (usually up to 5 years), during which changes in retirement provision (non-State Pension savings and investments) do not need to be reported, unless this would result in an increase in a person’s Pension Credit award. AIPs will be gradually phased out between 2016 and 2019.
Basic State Pension
This is a regular payment from the government most people can claim when they reach State Pension age based on the number of qualifying years they have on their National Insurance record. To get the full amount of basic State Pension (£119.30 a week in 2016 to 2017) people who reach State Pension age between 6 April 2010 and 5 April 2016 need to have 30 qualifying years. This is part of the State Pension under the old rules and will not form part of the new State Pension award.
Contracted out
A person was contracted out of the additional State Pension if they were a member of a workplace pension scheme that provides salary-related benefits in place of the Additional State Pension. People can also have been contracted out by being a member of a money purchase workplace or private pension which met the requirements for contracting out. Both the employee and their employer pay lower rate National Insurance contributions for the time they were contracted out.
As a result, people who were contracted out may have little or no Additional State Pension as they were building up a workplace or personal pension instead.
Contracting out ended on 5 April 2016.
Contracted out deduction
The deduction applied to a person’s Additional State Pension to reflect periods of time they were contracted out between 1978 and 1997.
Deferral
A person can decide not to claim their State Pension when they reach State Pension age, and may be able to add some extra State Pension to their entitlement depending on how much time they put off claiming their State Pension; this is called deferral. The rules for deferral are changing under the new State Pension scheme for people who reach State Pension age on or after 6 April 2016.
Graduated Retirement Benefit
This was the earnings-related State Pension for the period 1961 to 1975. It is part of the State Pension under the old rules.
Guarantee Credit
This is a part of Pension Credit available to people who have reached the qualifying age (women’s State Pension age), which can top up weekly income to a minimum amount.
Minimum qualifying period
A person will normally need at least 10 qualifying years of National Insurance contributions or credits in order to qualify for any new State Pension. This is known as the minimum qualifying period.
National Insurance contributions
Employees and employers make contributions towards the National Insurance Fund. These contributions may add qualifying years to a person’s National Insurance record.
National Insurance credits
People get National Insurance credits in certain circumstances such as when they are ill or unemployed and claiming certain benefits (including Child Benefit for a child under 12). They cover periods when a person is not making National Insurance contributions and may add qualifying years to a person’s National Insurance record.
National Insurance record
A person’s record of National Insurance contributions and credits.
New State Pension
The new State Pension has been introduced for people who reach State Pension age on or after 6 April 2016.
Pension Credit
An income related benefit for people living in Great Britain who have reached the minimum qualifying age (women’s State Pension age). It is paid to either single people or couples on a household basis. There are 2 parts:
People can receive either a combination of the 2 parts or either part on its own.
From 6 April 2016, Savings Credit will not be available for people reaching State Pension age on or after that date.
Protected payment
The part of a person’s starting amount at 6 April 2016, which is above the full new State Pension amount, if applicable. It is paid on top of their full new State Pension amount and increases each year in line with inflation.
Qualifying year
A complete tax year during a person’s working life in which they paid, were treated as having paid or were credited with National Insurance contributions on earnings above the weekly ‘Lower Earnings Limit’ (£112 a week in 2016 to 2017).
Rebate Derived Amount
This is a deduction applied to a person’s starting amount to reflect periods of time they were contracted out between 1978 and 5 April 2016. It forms part of the calculation made based on people’s pre-2016 National Insurance records using the new State Pension scheme rules.
Reduced Rate Election
This is commonly known as “Married Woman’s Stamp”. Until 1977 married women and widows could ‘elect’ (choose) to pay a reduced rate of National Insurance contributions. These reduced rate contributions do not count towards the main contributory benefits (including State Pension) based on a person’s own contributions.
Savings Credit
This is part of Pension Credit and is a payment for people who saved some money towards their retirement, for example, a personal or private pension.
From 6 April 2016 the savings credit will not be available for people reaching State Pension age on or after that date.
Starting amount
A calculation will be made using a person’s National Insurance record as of 6 April 2016, which compares the amount of State Pension a person may get based on either the current State Pension rules or the new State Pension rules if these were in place throughout their working life. Both amounts will be adjusted to take account of periods of contracting out. The starting amount is the higher of these 2 amounts. It will be the least a person will be entitled to in the new State Pension scheme as long as they meet the minimum qualifying period.
State Earnings Related Pension Scheme (SERPS)
Between April 1978 and April 2002 this was the earnings related part of the State Pension under the old rules.
State Pension (for people who reached State Pension age before 6 April 2016)
This is made up of basic State Pension and Additional State Pension and any pension from Graduated Retirement Benefit. People who reached State Pension age before 6 April 2016 receive their State Pension under this scheme.
State Pension age
The earliest age at which a person can claim their State Pension as laid down by legislation. For more information on how to check your State Pension age, go to www.gov. uk/calculate-state-pension
State Second Pension (S2P)
This is an earnings related part of the State Pension that was introduced on 6 April 2002 to replace State Earnings Related Pension Scheme (SERPS). It improved benefits for low and moderate earners and extended access to include certain carers and people with long-term illness or disability.
State Pension top up
This was a time limited scheme that ran between 12 October 2015 and 6 April 2017 for people who reached State Pension age before 6 April 2016. People were able to make a voluntary National Insurance contribution (Class 3A) to top up their Additional State Pension by up to £25 per week. This scheme is now closed for applications.
Uprating
The annual increase in a benefit or pension, which is usually either in line with at least earnings or prices depending on which benefit or part of the State Pension is being uprated.
Workplace pension
This is a type of private pension offered by an employer and is sometimes called an occupational pension scheme.