Impact of the new single-tier State Pension

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In May 2014, Parliament passed the Pensions Act 2014 which introduces the new single-tier State Pension for people reaching State Pension age on or after 6 April 2016. Here we look at the likely impact of the changes and Age UK's views.

What is the new single-tier State Pension?

When the new single-tier State Pension is fully introduced, the aim is for everyone who has at least 35 years of National Insurance contributions or credits to receive a flat-rate pension expected to be at least £148.40 in today’s prices. However, due to contributions made before 6 April 2016 people may receive more or less than this amount as we move to the new system.

Find out more about the proposals

Age UK supports the aims of a simpler system, which provides a better pension for many women and low income workers. However, we are concerned that current pensioners are not included and we have highlighted some specific groups who could be adversely affected.

Our views are set out in our Pensions Bill briefings for MPs and Peers which can be found in our Parliamentary briefings section. Although the concerns Age UK highlighted were debated in Parliament, the legislation was agreed with little in the way of changes to the original proposals.

How will the new single-tier State Pension affect current and future pensioners?

Whether or not you will be in the single-tier pension system will depend on when you reach State Pension age.

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If you have already reached State Pension age or will do so before 6 April 2016

If you have already reached State Pension age (even if you have not yet claimed your pension) or will do so before 6 April 2016, you will not be affected by the changes and will continue to receive your State Pension in line with existing rules. So if you currently receive or are due to receive a State Pension of less than £148.40, you will not get a higher pension when the new system comes in.

We know that many pensioners and those approaching State Pension age are disappointed to have been excluded from the new single-tier pension. Age UK is keen to see improvements for those people who have already retired and will continue to argue that the single-tier should be extended to all with no loss of current rights.

If you are a current pensioner and feel strongly about these issues, you could write to your MP.

Find out who your MP is

If you will reach State Pension age on or after 6 April 2016

Those who will benefit

Generally those who are most likely to benefit from the new single-tier State Pension will be people with low lifetime earnings and those who have time out the labour market due to unemployment, caring, or disability.

In this situation the single tier of around £148.40 may be higher than you would have received under the current system.

The self-employed, who currently only build up entitlement to the basic pension, could also receive a higher State Pension.

Those who may receive less under the single tier

The Government wants the changes to cost no more than the current pension system so while some people will gain others will receive less than they would have done had the current system continued.

If you have already built up an entitlement to the basic and additional State Pension of more than £148.40 then this amount will be protected, but you will not be able to increase your entitlement for years of contributions after 6 April 2016.

While as explained above not everyone will receive the full single-tier pension, most people will receive at least as much as they would have been due under the current system before 6 April 2016. However there are some groups who may receive less:

  • People with less than ten years of contributions - this is the minimum number of contributions needed to qualify for any State Pension under the new system whereas there is no minimum number of years under the current system.
  • People affected by the abolition of the Savings Credit part of Pension Credit - even though their State Pension may be as much or more, overall they could be worse off due tp changes to the means-tested benefits.
  • Some people (mainly women) who under the current system would receive a State Pension on their partner’s record which is more than they are due on their own record. While there are exceptions, in general the new system is an individual entitlement.

Further information

Only brief information is given here and the amount of State Pension you will receive will depend on your circumstances and when you reach State Pension age.

People will want to know what their entitlement is likely to be in order to plan their retirement and in some cases to take action to increase their new State Pension entitlement - for example by paying voluntary contributions or working longer.

If you are due to reach State Pension age on or after 6 April 2016, currently the DWP is not able to give you an estimate of your likely entitlement. However this will be available later this year for people reaching State Pension age in the first five years of the new system.

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