State pensioners born before 1951 are missing out on up to £2,932 from the Department for Work and Pensions (DWP), all because of a two-tier system. Under DWP rules, there are two state pension rates: the new state pension and the basic state pension. The basic rate is considerably lower than the full new rate.
Who Gets Which Pension?
The new, full state pension is paid to men born after 1951 and women born after 1953. The basic state pension, for older pensioners, rose by 4.8% from £176.45 to £184.90 per week in April. Meanwhile, the full new state pension also increased by 4.8%, from £230.25 to £241.30 per week.
This means those on the full new state pension receive £12,547.60 over a year, which is £2,932.80 more than the basic rate. People who reached state pension age before 6 April 2016 are eligible for the basic pension.
National Insurance Requirements
To receive the full basic state pension, you need at least 30 years of national insurance contributions. If you are a woman born before 6 April 1950 or a man born before 6 April 1945, you may need more contributions, so it is advisable to seek specialist advice.
Before 2016, there was a two-tier state pension. Individuals could get the full basic state pension if they had paid national insurance contributions for at least 30 years. Depending on the level of contributions, they might also have been eligible for some additional state pension.
Government Response
When introducing the new state pension, former pensions minister Steve Webb (Liberal Democrats) said: "The new state pension will be fairer to the low-paid, the self-employed and carers, and make it easier for people to understand what they will get from the state when they reach state pension age."
The government has responded to calls to merge the pensions into one rate, stating: "The government has no plans to provide all pensioners born before 6 April 1951 with the new state pension." The response added: "Comparing the headline full rates alone is misleading: this does not reflect the full position for people under each system. Although the systems are different, they both reflect the national insurance contributions an individual has made over their lifetimes."
