Your state pension may be reduced if you are “punished”

The national pension is meant to be straightforward: if you’ve made at least 35 years of national insurance contributions, you’ll qualify for the full benefit, which currently costs £230.25 a week. However, hundreds of thousands of people are finding that this is often not true – they are in line to receive less than the full amount because of how they saved for retirement decades ago.

The confusion stems from a major shake-up of the state pension that came into effect in 2016. Before the changes, most people were entitled to two types of retirement benefits from the state – the basic state pension and an additional payment related to their earnings, earned through the State Earnings Related Pension Scheme (Serps) or State Second Pension (S2P). Now, anyone who reaches state pension age after 6 April 2016 gets this benefit. But when Serps and S2P were in place, working people had the option to “opt out” of these schemes with a personal pension. They paid less for national insurance, and the money was returned to private pensions.

Are you in a contract? You may not be entitled to a full state pension