From 6 April, the New State Pension replaces the current two-tier system of the Basic State Pension and the State Second Pension. The New State Pension will start at a level of £155.65 a week for anyone retiring after this date.
However, more than half of those retiring in the first few years will actually get less. "If someone is entitled to a higher amount under the current system, this benefit will be honoured," says Tom McPhail, head of retirement policy at Hargreaves Lansdown. "However, for those who have been contracted out there will be potentially significant reductions to their state pension entitlement to reflect this."
But people who have been contracted out and are still a number of years away from retirement will have the opportunity to rebuild their state pension entitlement through the payment of further National Insurance contributions between now and retirement.
Meanwhile, the transition period means those approaching retirement age should take careful note of the application process for the New State Pension, as you won't normally get it automatically. Rather you have to claim it.
The government should send you a letter four months before the State Pension age telling you what to do. If you haven't heard by three months before your State Pensions age, you need to contact the government at 0800 731 7898 or www.gov.uk/claim-state-pension-online.
"This is a problem as many people, particularly women, won't know their State Pension age," says Kate Smith, head of pensions at Aegon. "People won't necessarily realise they haven't got the four-month letter, so risk their State pension being paid late."
The State Pension age for women currently changes every month as it is moving to 65 by November 2018, in line with the State Pension age for men. It will then increase in steps to age 66 for both genders by 2020.
