What do I need to know about the basic state pension?

A common mistake made by many is to assume that everybody gets a basic old age pension (more correctly known as the State Retirement Pension) as a right. In fact the amount of State Pension you get depends on how many years you have paid National Insurance contributions, or are considered to have paid contributions.

Men need to have 44 years' worth of NI contributions to get a full basic State Pension and women who reach 60 before 2010 need to have clocked up 39 years.

However, the age at which women can start to claim the state retirement pension rises from 60 to 65 between 2010 and 2020 so the number of qualifying years a woman needs will gradually increase to 44 years. (You can find out when you will qualify for a pension at http://www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp)

• You will almost certainly have paid contributions if you have been in full time paid work and earning a reasonable wage.
• You will almost certainly be considered to be paying contributions (even though you haven't actually paid any money) if you are registered as unemployed or for years since 1978 if you are caring for young children or an invalid.
• If you are self employed then you are legally required to pay NI contributions.

Common reasons why people may not have the full qualifying contributions are:

• time spent working overseas
• time spent out of work but not registered as unemployed or with children to care for
• earning too little to pay National Insurance contributions. Currently National Insurance contributions are only paid on weekly earnings over a limit set annually. In 2006/7 it is £84 a week, though it will have been below this in earlier years. If you earn below this lower earnings limit then you have not made National Insurance contributions.
• married women who have chosen to pay reduced National Insurance contributions –  the so called 'small stamp' – do not qualify for a pension. Instead they are dependent on their husband's pension entitlement.

The full basic State Pension for 2006/07 is £84.25 a week for a single person and £134.75 for a couple. For many years the state retirement pension went up in line with either prices or wages. This meant it more or less kept up with living standards. But the link with earnings was ended in the 1980s, and the State Pension has therefore not kept up with living standards, although in recent years significant extra help has been provided for the poorest pensioners through the benefits system.

You can put off claiming your state pension. In return you can get either a bigger pension or a lump sum.

If you put off claiming your State Pension for at least five weeks you can earn an increase to your State Pension of 1% for every five weeks you put off claiming. (This is equivalent to about 10.4% extra for every year you delay claiming.)

Alternatively, if you put off claiming your state pension for at least a year, you can get a lump sum. There are more details here on the Pensions Service website.

You can find out more about the basic State Pension on the Pension Service website.

You can also get a State Pension forecast telling you in today's money the State Pension you have already earned and what you can expect to have earned by State Pension age. It will also include details of your additional State Pension, if you have one.

You can apply for a state pension forecast online. This link will also tell you how to apply for one by phone or post, and explain how they work.