Do people out of work get a pension?

Hope4Hope

Hi,

I just watched a state pension video and it said you have to have 35 years of national insurance contributions to get the maximum amount of state pension and at least 10 years to receive ANYTHING.

What happens to people with disabilities who have been out of work for significant periods of time? Imagine worst case scenario and you've been living on ESA and PIP. When you reach state pension age, how much will you get? Nothing? Surely not...

PeacefulWaters

Many benefits accrue NI contributions for state pension.

Many on reduced pensions receive benefits to lift them up to a minimum income.

jackyann

PeacefulWaters wrote: »

Many benefits accrue NI contributions for state pension.

Many on reduced pensions receive benefits to lift them up to a minimum income.

You can check on gov.uk to find out which benefits credit you with NI contributions.
Until a child is 12, one parent can claim NI contributions. This used to be done by the Child Allowance book - now not all families get Child Allowance, I think you have to do a notification (again see gov.uk)
Those in receipt of Carer's Allowance are similarly credited.

If you choose not to work or claim relevant benefits because you are financially supported in another way, then you can buy NI contributions to enable you to claim the State pension.

jamesd

People who are resident in the UK get roughly the state pension level through a benefit called Pension Credit even with no NI record.

If a person was capable of normal work but did not seek work and did not receive child benefit then they will accrue no state pension entitlement for as long as this persists. Child Benefit delivers NI credits to the person who's receiving it until the child's 12th birthday, or to who is entitled to it but not receiving it because of a too high income.

An old fashioned stereotypical case would be a housewife with no children living on a husband's income, but a relatively uncommon stereotype since with children is more common and gets the NI credits. A stereotype for getting the maximum state pension without ever working would be [STRIKE]a couple of children[/STRIKE] three children with a large age gap to produce [STRIKE]35[/STRIKE] 36 years of NI credits but the required age gap with just [STRIKE]two[/STRIKE] three children is uncommonly large.

Means tested benefits for those who are unable to do normal work come with NI credits that like Child Benefit count towards state pension entitlement.

Pension Credit is a means tested benefit that is available to people without any NI record at all who are resident in the UK. In addition they would be entitled to things like Housing Benefit.

The current single tier/flat rate state pension pays 1/35th of the maximum/cap for each year of credits accrued, limited to no more than 35/35 worth. If not entitled to the maximum, Pension Credit can top it up to £155.60 is single or £237.55 for a couple. The couple level is where the first real penalty for not paying in comes. If both had full enough records they would each get their own state pension so about 2 x 155.60 = £311.20. If Housing Benefit is needed that might eliminate the difference between the two cases, bringing the ones getting £237.55 closer to those getting the £311.20.

The bigger differences start to arrive once people have other income, since the state pension is not means tested and once above means testing levels you get a pure benefit from your extra income.

It's entirely possible to live on the state pension alone but I don't recommend deliberately trying it.

It's not hard to get way more provided you start early with pension investing. Someone starting at age 30 with a state pension age of 68 could get about £12,000 of lump sum in today's money at 68 for a £10 monthly payment that is increased with inflation, enough to produce about £9.23 a week of extra income for life.* That's gross so the real out of pocket cost would be £8 before tax relief. £136 net a month could roughly double the amount received compared to the state pension alone. Employer contributions would usually do a fair bit of the work as well.

If you wanted a target, average household income for retired households is about £21,000 at the moment. A couple with two flat rate state pensions would get £16,000 leaving just £5,000 to find. That 5000 could be acquired for £83 net a month from age 30.

*growth of 4.5% plus inflation, 4% assumed income level in drawdown

jackyann

James, that is very informative, and helpful, but I think you may be out of date on Home Responsibilities Protection. From 1978 to 2010, one parent did get it until the child was 16 (which with maternity allowance just tallies up with your sums) but the age is now 12.

There are also credits for foster parents and similar, which are all clearly set out on gov.uk.

As for the original query, AFAIK, ESA gives you NI credits and PIP is outside the befit system, but of course, OP needs to check exactly what applies. Turn2us is also a useful site.

jamesd

Thanks, you're right that I was using the old HRP age 16 instead of the current age 12.

DigForVictory

Knickers.
You're Absolutely Right jackyann, & that means OH has not been getting NI credits for 2 years. Eeep! I thought I'd been clever shifting the "mothers stamp" as was to him but absolutely dropped *that* catch.

Thank you for the warning!

jackyann

You can buy extra years - I think there's a time limit, but it's quite a long one.
I know quite a few people who have simply bought their NI stamps. Again, it was traditionally women, but quite a lot of people stay at home to care for the family.
I am glad that a parents of a child under 12 , and those with carer's responsibilities get credit - but there are quite a few who can't claim either of those, but just feel that their families are better off with them being around, maybe doing a small amount of casual work.
If you, for instance, have one parent who is away a lot, works long hours at a difficult job, and you have teenage children and elderly parents, you may decide that the other half just needs to be around. I know a few in those circumstances - and buying NI credits is very sensible financial planning.
And DfV - I'm glad you've been reminded, and for pointing out that the change in 1978 enabled the credit to go to either parent. I also know a few women who've forgotten / not realised.

p00hsticks

jackyann wrote: »

JFrom 1978 to 2010, one parent did get it until the child was 16 (which with maternity allowance just tallies up with your sums) but the age is now 12.

There are also credits for foster parents and similar, which are all clearly set out on gov.uk.

It's also worth pointing out that for the last few years if parents are working enough hours to get an NI year (and therefore don't need the NI credits linked to Child Benefit) then the NI credits can effectively be passed on to another family member (such as a grandparent under state retirement age) who is providing childcare for them

https://www.gov.uk/government/publications/national-insurance-credits-for-adults-who-care-for-a-child-under-12