TARGET 221 - BOOST YOUR NEW STATE PENSION

UPDATED for the 2024/25 tax year. All rates are those paid from 8 April 2024.

More than a million people who reach state pension age in the years from 6 April 2016 will not get the full amount of the new ‘flat-rate’ state pension - currently £221.20 from 8 April 2024.

But many of them could boost their pension towards or up to the full flat rate amount.

This guide is for men born 6 April 1953 or later and women born 6 October 1953 or later who paid into a good pension at work or, in some cases, into a personal pension.

It is complicated - don't blame me I didn't invent the rules! But please persist, as it could make you better off for the whole of your retirement.  

There are other groups who may not get the full new state pension because they have paid less than 35 years of National Insurance contributions. They may be able to boost their state pension by paying extra contributions now. This piece does not cover that issue. Try the links at the end.

NEW STATE PENSION

The new state pension was supposed to be simple. A flat-rate amount for everyone who had at least 35 years of National Insurance contributions. This year 2024/25 that amount is £221.20 a week (£11,502 a year) and is taxable. However, there are around one and a half million people who will reach pension age in the years before 2027 who will get less than that even if they have 35 years or more National Insurance contributions.

That is because an amount is deducted from the new state pension for every year they paid into a good pension at work. I call it a contracted out deduction because they were ‘contracted out’ of part of the state pension called SERPS or State Second Pension (S2P). They paid lower National Insurance contributions and instead of that additional state pension they get a pension from their job which was supposed to replace it. The Government prefers to call it 'Contracted Out Pension Equivalent' or COPE. It is that COPE amount that is deducted from your new state pension.

This group includes most people who worked in the public sector, such as

• nurses, doctors, and others in the NHS
• teachers in schools and universities
• police officers and fire brigade staff
• civil servants
• local government workers
• armed forces
• Post Office workers

It also includes many people who worked for one of the privatised industries such as British Airways, British Rail, British Steel, and Royal Mail.

Another large group affected are people who worked for a private sector employer who paid into a good scheme at work that promised them a pension related to their salary. They used to be called ‘final salary’ schemes and nowadays are called Defined Benefit or DB schemes. In the past many large firms ran such schemes. There are still more than 5000 of them and if you paid into one at any time from 1978 your new state pension will be reduced.

Also included are some people who paid into a personal pension and who were persuaded to contract out of part of the state scheme – at the time it was normally called ‘contracting out of SERPS’.

For all these people their new state pension will be reduced to take account of the years they paid into a contracted out pension scheme. That deduction applies even if they have paid the 35 years which is needed to get a full pension – the deduction is made after the full pension is worked out. It can also apply even if they were contracted out for a short period and paid in 35 years or more when they were not contracted out. These deductions can be very large but normally can never leave you with less than £169.50 a week of the old or 'basic' state pension.

Please do not ask me why that is fair! It may not be fair, but it is the law. The good news is that you can reduce that deduction and, depending on your age and the amount deducted, you may be able to boost your pension up to the full flat-rate £2221.20.

THE DEDUCTION

If your new state pension has an amount deducted from it because you spent some time paying into a good pension scheme at work then you can reduce that deduction or even wipe it out. It will help even if you already have 35 years of National Insurance contributions or more.

If your new state pension is reduced because you paid into a good pension scheme at work then every year of National Insurance contributions you pay or have credited from 2016/17 to the year before the tax year in which you reach state pension age - currently 66 for everyone - will mean that deduction is less.

If you work and earn more than £123 a week you will get contributions credited or paid to your account (you start actually paying for them when you earn above £242; under that they are credited). If you get child benefit for a child who is less than 12 years old then you will also get a credit for each week. If you get universal credit, jobseeker’s allowance, employment and support allowance, or working tax credit then you will get a credit for each week you get that benefit. You can also get credits if you are a carer in some circumstances. Check here for more details of who can get credits. Some are given automatically, others have to be claimed.

Men can get credits for years between women’s state pension age and 65. They get a credit for the tax year in which they reach women's state pension age (unless they also reach 65 in that tax year) and any subsequent tax year before the tax year they reach 65. So these man credits are only available to men born before 6 October 1953. See footnote.

If you are self-employed then up to 2023/24 you paid what are called Class 2 National Insurance contributions if your profits were £12,570 or more. They were £3.45 a week (£179.40 a year). If your profits are between £6725 and £12,750 you will be given a credit. If your profits are up to £6724 you can pay these contributions voluntarily - but only for years in which the were genuinely self-employed. In previous years there were no credits paid and the threshold for paying was just below £6725 a year. 

If you will not pay National Insurance contributions at work or as self-employed or get credits for them then you can pay voluntary contributions, called ‘Class 3’. They will cost you £15.85 a week (£824.20 for a year). For each extra year of contributions your pension will be boosted by £6.32 a week (£328.64 a year) so the payback is rapid – two and a half years for non-taxpayers; just over three if you pay basic rate tax; just over four for higher rate taxpayers, and four and a half for top rate 45% taxpayers. Contributions for 2023/24 were the same as 2024/25 at £907.40 but a concession made recently means that the 2022/23 rtes are applied to back contributions up to 2023/24. So those filling gaps pay the 2022/23 rate - £824.20 - until 5 April 2025. Contributions for 2021/22 and earlier will also be at that rate [For reference earlier rates were 2021/22 -£800.80, 2020/21 - £795.60, 2019/20 - £780.00; 2018/19 - £772, 2017/18 - £740, and 2016/17 - £733.20 but you can no longer pay at these rates.]

The new state pension was increased to £221.20 a week from 8 April 2024 rising according to the triple lock of earnings, prices, or 2.5%. Earnngs rose most so the pension rose with them by 8.5%. 

If you have paid some contributions at work or as self-employed during the tax year but you are short of a full year you can pay individual weeks through Class 3 (or Class 2) to make your record up to a full year.

You can only pay Class 3 contributions for the years before the tax year in which you reach state pension age. That limits the number of years you can pay to boost your pension. The table show which years you can pay Class 3 contributions to set against the contracted out deduction and the maximum boost that should give to your pension. Your pension cannot be boosted to more than £221.20 a week and it will not ever be reduced to less than £169.50 so the maximum boost is £51.70. Paying the ninth year may not be worth it for £1 a week boost.

BOOSTING A NEW STATE PENSION THAT IS SUBJECT TO A CONTRACTED OUT PENSION EQUIVALENT (COPE) DEDUCTION

Reach State Pension Age in	Men born		Women born		Years you can pay	Maximum pension boost (2024/25 rates)
2016/17	6 April 1951	5 April 1952	6 April 1953	5 July 1953	0	£0.00
2017/18	6 April 1952	5 April 1953	6 July 1953	5 Oct 1953	1	£6.32
2018/19	6 April 1953	5 Jan 1954	6 Oct 1953	5 Jan 1954	2	£12.64
	Men and women born
2019/20	from 6 January 1954		to 5 July 1954		3	£18.96
2020/21	from 6 July 1954		to 5 April 1955		4	£25.28
2021/22	from 6 April 1955		to 5 April 1956		5	£31.60
2022/23	from 6 April 1956		to 5 April 1957		6	£37.92
2023/24	from 6 April 1957		to 5 April 1958		7	£44.24
2024/25	from 6 April 1958		to 5 April 1959		8	£50.56
2025/26	from 6 April 1959				9	£51.70 (max)

NEXT STEPS

You can normally pay voluntary Class 3 contributions in the tax year they are due or up to six tax years after that. But a concession announced earlier this year means that you can still pay for the 2016/17 tax year until the end of this tax year, 2024/25. But from 6 April 2025 the earliest year you can pay will jump to 2019/20. So you should act quite soon if you want to pay for the three tax years before that. You cannot pay them in advance so make a note to pay future years in April. However, the price will almost certainly rise as time passes so it will usually be cheaper to pay them as soon as you can.

If you will reach state pension age in 2024/25 you may want to act soon to see if you can boost your pension by paying National Insurance contributions for the eight years 2016/17 to 2023/24. That could give you an extra £50.56 a week on your pension.

You can phone the DWP’s Future Pension Centre on 0800 731 0175 and ask for help or advice about paying extra contributions. Have your National Insurance number with you. Ask what your ‘starting amount’ is and ask if there is a deduction for being contracted out. If your starting amount is less than £221.20 and there is a contracted out deduction then you may be able to boost it using the information in this guide. 'Starting amount' is explained in the notes below. If you have a deduction for a pension which you cannot trace use the Government's free Pension Tracing Service.

In the past, many people have contacted the DWP and been told they cannot boost their pension because they already have 35 years or more of contributions. That is incorrect. Some officials seem to be confusing this scheme with one to fill gaps in your contribution record. Others have been told that they need more than 35 years to get a full pension. That can be true in the circumstances in this blogpost, but it is a confusing way to put it. 

You may get more sense from the free and excellent Money Helper website or call on 0800 011 3797. Beware of similar sounding commercial organisations.

You can check your starting amount at this Government website. You will have to go through security procedures which can be a pain. Make sure it includes your 2015/16 contributions. This website may let you see how you can boost your pension by paying extra National Insurance contributions. 

NOTES

1. All the rates in this guide are correct in 2024/25. 

2. If your income is low then you may get extra money from pension credit or help with your council tax or rent (rent or rates in Northern Ireland). If you buy Class 3 contributions to boost your pension those benefits will be reduced but it will almost always still be worthwhile.

3. Your ‘starting amount’ is the calculation of how much state pension you have built up at 6 April 2016 under the old and the new rules. Your starting amount is the one that is bigger. It will take account of National Insurance contributions paid up to 2015/16 and will also make a deduction for years you have been ‘contracted out’ of part of the state pension system called SERPS. If it shows that you have fewer than 35 years of National Insurance Contributions then you may be able to pay to fill gaps right back to 2006/07 to boost that number. But always check if it is worthwhile to do so - see  Filling gaps in your National Insurance record – new state pension. 

4. SERPS, the State Earnings Related Pension Scheme, was an earnings-related supplement to the basic state pension. People paid into it as part of their National Insurance contributions from April 1978 to April 2016. From April 2002 it was changed and renamed State Second Pension (S2P). It was SERPS and S2P – officially called ‘additional pension’ – which people ‘contracted out’ of if they paid into a good pension at work or in some cases into a personal pension which they chose to ‘contract out’. They paid lower National Insurance contributions. The pension they paid into was supposed to replace the SERPS or S2P but it does not always do so in full. 

5. Tax years run from 6 April one year to 5 April the next. So 2024/25 runs from 6 April 2024 to 5 April 2025.

6. If you have an old company or personal pension you cannot trace, use the Government's free Pension Tracing Service.

7. Contacted Out Pension Equivalent is the amount deducted from your new state pension to take account of the time you were contracted out of SERPS/S2P. In theory the amount deducted should be paid to you by the pension scheme you paid into as part of being contracted out. But that will not always happen especially if you were contracted out into a personal pension. This government guide to contracting out sort of explains it.

8. Man credits. These credits for men - called auto-credits - are only awarded for whole tax years, not individual weeks. Men born 6 April 1952 to 5 April 1953 can get a year of contributions credited for 2016/17. They may also get earlier years credit but they do not help with reducing their contracted out deduction. Men born 6 April 1953 to 5 October 1953 can get a year credited for 2017/18.

Men born 6 October 1953 or later cannot get them.

BOOST YOUR PENSION GUIDES FOR OTHER GROUPS

Men born 6 April 1951 or later and women born 6 April 1953 or later.

·       Filling gaps in your National Insurance record – new state pension 

Men born before 6 April 1951 and women born before 6 April 1953

·        It is now too late for you to fill any gaps in your National Insurance record – old state pension 

·        

There is also a comprehensive guide to what you can do to top up your state pension available as a download from the mutual insurance company Royal London written by former Pensions Minister Steve Webb. It is a little out of date now but is well worth a couple of hours study.

Version: 7.5

29 April 2024
Previously: Target 203, Target 155, Target 164, Target 169, Target 175, Target 179, Target 185

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Nanocharge will fund remission of fees at top university

 

OXFORD UNIVERSITY TO ABOLISH STUDENT FEES

One of Britain's top universities is to abolish student fees after the Supreme Court allowed it to charge a royalty on every use of English words online.

From 6 April 2024 Oxford University will use a monopoly granted by Henry VIII to demand money from the one billion people who write online in English. They will automatically be billed a ‘nanocharge’ of 0.0001p by Oxford University Press for every word they publish online if it is in the Oxford English Dictionary. Fees from the estimated fifty trillion English words written online each year will allow the university to make education free at all levels.

The Oxford English Dictionary itself only began in 1859 and rapidly became the definitive record of the language. 

But under Letters Patent of 1523 Henry VIII granted the University “our speciall lycence” to collect money “from thoos persons who prynt in the language of Englonde” and use such money “for the supporting and maynteynyng of the vnyuersite of Oxenford” and the order “shulde passe and be sealed vnder our greate Seale as by our said comaundement as ye haue more parfite knaulage of the language of Englonde than any other”.

Henry VIII Letters Patent of 1523 granting Oxford University rights to all English words ‘in perpetuity’. 

The royalty could have been charged at any time since 1523. But early attempts to levy printer’s type led to riots against the so-called “taxes on knowledge”. The situation changed last week when the Supreme Court held unanimously that the words of the Letters Patent "could not be clearer” and gave Oxford the right “in perpetuyte” to the copyright on the words in its Dictionary. The court rejected a counter-claim by rival publisher Collins that the Letters Patent were repealed by the Monopolies Act 1624. “No such provision exists in the Statute” said the President of the Court and High Steward of Oxford University Lord Reid of Allermuir. Significantly, Justice Lord Lloyd Jones, who went to Cambridge, did not dissent.

Professor Fiona Nomura, a Proctor of Oxford University Council, told me in an exclusive interview

“For nearly half a millennium Oxford has allowed England, Britain and the world to use the English language free of charge. However, the University is increasingly uncomfortable at the higher annual fee of £9,250 charged to our UK undergraduates. So Congregation decided to use this ancient right to levy a charge on every online use of the words which are the University's copyright and make education at this world beating institution free again.”

She pointed out that Henry VIII himself was a great patron of education and founded several grammar schools and colleges.

Oxford claims the amount “will be too little for an individual to notice but very valuable to our students”.

All words published online will be compared with the online Dictionary and an automatic PayPal debit applied for each word in it. The nanocharge of 0.0001p levied on the estimated 500 trillion online uses of English words each year will raise £500m – more than enough to replace the £110m in fees paid by Oxford’s 12,000 undergraduates. The balance will be used for bursaries and to support its 11,000 postgraduates – who Congregation called “the entrepreneurs of tomorrow” in the so far secret meeting that made this historic decision.

However, Professor Angie Buff of Trinity College Cambridge said the move was a backward step. “It will lead to people misspelling and making up words to try to avoid the nanocharge. They may even start tweeting in foreign languages. It may help a few Oxford students but it will damage literacy and, ultimately, English itself.”

The levy will cover all websites and social media including blogs, Twitter, Facebook, LinkedIn, and even the subtitles on YouTube. Twitter alone publishes 3 trillion English words every year. Oxford is working with GCHQ to extend the nanocharge to encrypted services such as SnapChat.

Professor Nomura confirmed that the copyright only extends to the 600,000 words defined in the Oxford English Dictionary. “Neologisms such as ‘deepfake’, ‘sportswashing’, and ‘mountweazel' will still be free to use, should any ignoramus wish to do so.”

However, she confirmed that the fee would be levied on one relatively new word. At an emergency meeting of the Words Admission National Council English Register in March 2018 ‘Brexit’ was added to the Dictionary with immediate effect. Such speed is unusual for an organisation which took twenty-four years to admit the word ‘snozzle’. Professor Nomura denied then that there were any plans at the time to charge people for using English words despite rumours spread on 1 April 2018. "It is simply because the definition was so clear" she said "Brexit means Brexit," Fi Nomura smiled, “end of."

UPDATE: I have learned that the nanocharge will be brought forward five days and will be applied from 0001 on Sunday 1 April.

Vs 3.0001

1 April 2024