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Pensions: The Basic State Pension

May 22, 2002

The value of the Basic Pension is slowly being eroded and by the time some of you reading this come to retire you'll be lucky if it buys you a packet of Mr Kipling's jam tarts and a box of teabags. It's also worth bearing in mind that not everybody qualifies for it - you have to have made a minimum level of National Insurance contributions (roughly speaking, you'll be OK if you've paid at least the same amount as the basic pension for most of your working life).

You can get a state pension forecast from the Department of Social Security to check if you're up to date with your NI contributions and if not, you may be in a position to top it up. But don't rely on the Basic Pension too much when you're making your retirement calculations as it'll amount to a pittance by the time you're able to claim it.

Having said all that, it's currently worth £75.50 per week (which is just £3,900 a year). The Government plans to increase it with inflation. Pension rates used to increase in line with wages (which typically increase at a higher rate than inflation) but this link was broken in the 1980s. Married couples currently get £120.70 but, if you qualify for more than this with two single pensions, then you get those.

Sometimes more relevant is the minimum income guarantee, or "MIG". This basically sets a floor to what the State will give you in retirement. The floor is a little some way above the basic state pension, so if that's all you get, then you'll qualify to get the MIG instead (although the benefit reduces if you have £6,000 or more in savings). Currently the MIG stands at £92.15 for a single person and £140.55 for a couple.

Not much is it? A full state pension for a married couple taken together with the MIG is less than £7,500 a year. That's why there is so much talk about us having to make extra provision for our retirement out of our own pockets.

More: Pension Centre