National insurance : What it may mean for your retirement

Q How does the state pension currently work?A Basic payment is £97.65 a week (£156.15 for a couple). Those on low income can get means-tested pension credits taking them to a minimum of £132.60 a week (£202.40 for couples). Some people are entitled to a second state pension, formerly Serps, a top-up that reflects earnings and NICs over their working life.

Q Does everyone automatically qualify for the basic pension?

A No. You need at least 30 years of NICs to get the full basic state pension. This means many women and carers lose out after taking time out of work and missing out years of NICs, although the qualifying level was reduced in April from 44 years for men, 39 for women.

Q Can I opt out of the state pension system?

A Since 1988 it's been possible to "contract out" and get your NICs rebated into a personal or work pension, the idea being to encourage people to boost private pension savings.

Q What is the government planning to replace the current system with?

A It wants to introduce one universal payment of 140 a week - 240 for couples - replacing the current mix of the basic state pension, means-tested benefits and earnings-related top-up payments.

Q How will I qualify for the full universal pension?

AThe idea is that it will be based on years of citizenship or residency, so you will no longer need a minimum level of NICs to qualify, although a lower minimum qualifying level may be retained.

Q I'm retiring soon and planning to move abroad. Won't I get the universal pension?

A This has yet to be clarified and could be a point of contention.

Q What about my second state pension?

A It is not yet clear what will happen to these contributions under the new system, but there will no longer be an option of contracting out of the second state pension.