Establishing the foundation amount
There are four situations that someone can find themselves in:
- Foundation amount equals new state pension
– Older people are likely to be in this category such as people who have worked or been self-employed most of their working life or spent significant periods receiving NI credit.
- Foundation amount is more than the new state pension
– Older people are likely to be in this category such as people who have worked most of their working life and were less likely to be contracted out
– These people will get the full new state pension and the protected payment when reaching SPA
- Foundation amount is less than the new state pension
– People who are a long way from the SPA or have only spent a few years working or receiving NI credit.
– Could also be older people who have contracted out
– They could build upon their foundation amount by adding qualifying years through extra NICs between 6th April 2016 and SPA.
- No Pre 6th April 2016 NIC record exists
– These individuals will have a new State Pension income when they reach their SPA as long as they have at least ten qualifying years on their NIC record.
Question - Use Your Note Taker To Jot Down Ideas / Calculations
Gavin was aged 60 as at 5 April 2016. At that time he had 32 qualifying years on his NIC record, had never been contracted out and had built up an entitlement to an Additional State Pension of £56 per week. Based on this information, how much is Gavin’s protected payment?
a) £9.42
b) £19.65
c) £32.99
d) £56.00
B)
Gavin’s foundation amount is £119.30 (the full BSP as he has the 30 years required for the full payment) + £56.00 = £175.30 (i.e. his entitlement under the pre-6 April 2016 rules as this is higher than 32 ÷ 35 × £155.65). This exceeds the full rate of the new State Pension by £175.30 – £155.65 = £19.65 and so this is his protected amount.
Remember: the foundation amount and protected payment was calculated as at 6 April 2016 and so the rates for 2016/17 are used in the calculation.