More than 12 million pensioners found their state pension increased last month – and a lot of you have asked me, “Why do some pensioners get more than others?”

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There are two state pensions, and which you get depends only on when you were born. For men, the crucial date is 6 April 1951; for women, it is two years later, 6 April 1953. If you were born before that, you get the old state pension. If you were born on or after that, you get the new state pension.

The standard rate of the new state pension is now £185.15 a week, but the basic old state pension is £141.85. That is a gap of £43.30 a week – or £2,251 a year.

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There are complex rules that can vary these amounts though, and the actual pensions paid under the two schemes average out at a fairly similar level. That’s because the old state pension comes with extras related to earnings. Most, but not all, old state pensioners get some of these. One is called graduated retirement benefit and averages £4 a week on contributions paid from 1961 to 1975. The other, best known as SERPS, is based on contributions paid from 1978 to 2016, and the average amount paid is around £34 a week. Together they boost the old pensions paid to many people towards the level of the new state pension.

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People who get the new state pension can find it is reduced if they also have a good pension from their employer. That can cut it in some cases to the level of the old state pension. And to confuse things even more, this reduction can be partly or fully restored by paying National
Insurance Contributions from April 2016 either at work or voluntarily. There are also complex transitional rules that can boost a new state pension.

So why these differences? The Government brought in the new state pension because it’s simpler – or will be in the future. And in the long term the new state pension, which appears much higher, will in fact cost the Government less than the old one did.

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Paul Lewis presents Money Box on Radio 4. QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com. Paul cannot answer you personally, but I will reflect them in his column

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