UK has two different state pensions with £56.40 difference – explained | Personal Finance | Finance

Many people nearing retirement age may be uncertain about which of the two state pensions they are entitled to claim.

The state pension system has undergone numerous changes in recent years, affecting pension credit and the state pension age itself.

As life expectancy rises and Brits continue to live longer, the state pension age is being gradually increased to 67 over the coming year, with further rises anticipated further down the line.

Payments themselves have also been revised. The two state pensions are allocated based on a person’s age, and both received a boost this month courtesy of the triple lock.

These are the basic state pension and the new state pension. Understanding which one you will receive upon reaching retirement age is crucial for financial planning.

Below is a breakdown of both payments and the reasons behind their existence.

The two existing state pensions are:

• The basic state pension
• The new state pension

The new state pension is now worth £241.30 per week, while the old basic state pension stands at £184.90 per week.

For those receiving the state pension, this represents a considerable difference of £56.40 per week.

Those entitled solely to the basic state pension will have already reached state pension age, as it exclusively applies to individuals who reached the qualifying age prior to April 6 2016.

Recipients must also have accumulated a minimum of 30 years of National Insurance contributions in order to receive the full payment.

Those who reached state pension age on or after April 6, 2016, receive the new state pension. Claimants must have accumulated at least 10 years of National Insurance contributions, with payments varying according to their National Insurance record throughout their working life.

In essence, the new state pension was brought in to streamline the system, which had previously been regarded as overly complex. Prior to this, additional payments were available to people based on their contributions.

The new rules came in on April 6, 2016. Therefore, those who reached state pension age before then were paid under the old rules.

The new system was unveiled in 2014 to establish a more straightforward and equitable method for people to receive the state pension.

It was also intended to enable better planning, as pensioners frequently remained unaware of their entitlement until they reached state pension age.