SE76161 - Social Security benefits: how retirement pension is made up

Section 617(1)(a) ICTA 1988

The different elements of a retirement pension

The amount of pension payable may be affected by a number of factors:

a. Basic Pension - if the National Insurance contribution record is satisfactory the amount will be the “standard weekly rate” quoted on Table 1 of form P242. Most pensioners receive more than this basic amount because of items (b)-(e) below. If the contribution record is unsatisfactory either a reduced rate or no pension at all will be payable

b. Additional Pension - this is the earnings-related part of a retirement pension. It depends on the earnings since 6 April 1978 on which the claimant has paid National Insurance contributions as an employee

c. Uprating of Guaranteed Minimum Pension - where a pensioner was in an occupational pension scheme before retiring, he will normally receive a guaranteed minimum pension (GMP) as part of his occupational pension. However, occupational pension schemes are not required to uprate GMPs when pension upratings take place, so often the increases due are paid by the DSS through the State retirement pension

d. Graduated Pension - this depends on the graduated National Insurance contributions paid by employees when the graduated pension scheme existed (1961- 1975). It is also known as graduated retirement benefit

e. Age addition - this is an extra 25p a week for any pensioner aged 80 or over

f. Increase for dependants - if a claimant gets some basic pension, it can be increased - subject to certain rules - for the following kinds of dependant

• a spouse
• a childminder
• one or more children

The increase is the income of the claimant, not the dependant. The taxability of dependency additions is explained at SE76102. Child dependency additions are not taxable (Section 617(1)(b) ICTA 1988).

g. Deferring retirement - extra pension may be earned by deferring retirement beyond age 65 for men (age 60 for women).