The New State Pension, or NSP, introduced on 6 April 2016, replaced the previous two-tiered system, which consisted of the Basic State Pension and the Additional State Pension, also known as SERPS and the State Second Pension.
The NSP was introduced to simplify the complex rules of the old system and establish a new, clearer foundation for retirement savings.
However, whether the new system is “fairer” depends entirely on your personal National Insurance, or NI, record under the old rules.
For many lower earners and the self-employed, the new system provides a significantly clearer and potentially higher pension than they would have received before.
For high earners who paid into the Additional State Pension, the new system capped their state entitlement, leading to feelings of unfairness.
Main Differences Between the Old and New State Pension Systems
The core difference lies in moving from a two-part system, which was earnings-related, to a single, flat-rate system
| Feature | Old System (Pre April 2016) | New System (Post April 2016) |
| Structure | Two tier: Basic Pension + Additional Pension (SERPS/S2P) | Single-tier, flat-rate pension |
| Full Pension Rate | Basic: £176.45 (2025/26 rate) + Variable Additional Pension | Full NSP: £230.25 (2025/26 rate) |
| Years for Full Rate | 30 qualifying years | 35 qualifying years |
| Spouse/Partner Rules | Possible to claim or inherit based on a spouse’s NI record | Generally based on individual NI record only |
| Contracting Out | Reduced NI payments, with the employer/private scheme making up the Additional Pension | Past periods of contracting out cause a deduction from the NSP starting amount |
Why the New State Pension is Fairer for Some
The New State Pension was specifically designed to help groups who often missed out on the full entitlements under the old system.
- Low Earners and Self-Employed: Under the old system, the self-employed could not pay into the Additional State Pension, limiting their state entitlement to the lower Basic State Pension rate. Low earners also built up very little or no Additional State Pension. The new flat rate of £230.25 per week is significantly higher than the old Basic State Pension of £176.45 per week. These groups benefit greatly from the simplified, higher foundation.
- Clarity and Planning: The NSP is easier to understand from a younger age. Knowing that you need 35 qualifying years for the full flat rate makes it much simpler to check your forecast and plan for retirement.
- Carers: Carers who receive National Insurance Credits for looking after children or adults can now use these credits to more easily achieve the full flat rate, providing a more robust state pension.
Why the New State Pension can seem Unfair for Others
The complexity of the transitional arrangements, particularly for high earners, has led to a perception of unfairness.
- The Contracting Out Deduction: This is the most common reason for disappointment. If you were a member of a workplace or private pension scheme that was contracted out of the Additional State Pension, you and your employer paid lower National Insurance contributions. When the DWP calculates your NSP “starting amount,” an amount is taken off to reflect the fact that you already benefited from lower NI payments and have a private pension that was built up to cover the Additional State Pension you gave up. This deduction can mean that even with 35 or more qualifying years, you do not receive the full £230.25 per week.
- Loss of the Additional State Pension: High earners, especially those who were not contracted out, could have built up a very large Additional State Pension under the old rules, potentially pushing their total pension well above the new flat rate. The NSP caps the maximum weekly amount at £230.25, except for those whose starting amount was calculated to be higher than this, in which case they receive a Protected Payment on top. Future high earners will no longer be able to exceed the flat rate.
- Loss of Spouse Rights: Under the old system, a non-earning spouse, typically a woman, could potentially receive a basic pension based on their husband’s NI record. Under the NSP, the pension is based almost entirely on your individual NI record only, making it harder for people with significant career breaks to build up an entitlement if they did not claim NI Credits.
How the DWP ensures fairness during the transition
The DWP implemented a transitional arrangement to ensure that people did not lose out on entitlements already built up before April 2016.
When the NSP was introduced, the DWP calculated a starting amount for everyone who had an NI record before 6 April 2016. This starting amount was the higher of two calculations:
- The amount you would have received under the old rules (Basic + Additional Pension).
- The amount you would have received under the new rules.
This protected your pension rights built up under the old system, meaning you did not receive less than you were already entitled to.
