The new State Pension — for people reaching State Pension Age on or after 6 April 2016


From April 2016 a new single-tier State Pension replaces the Basic State Pension and the Additional State Pension; “outdated” additions to the state pension, such as the Category D pension (see page 79) and the Age Addition will end; and the Savings Credit element of Pension Credit (see page 81) will also close to people who reach their State Pension Age on or after the date the new system is introduced. 


Those who are currently in receipt of the State Pension or who claim it before 6 April 2016 won’t qualify for the new State Pension and will continue to receive payments based on the previous system, but may be able to top it up. 


The new State Pension rules apply to:


• men born on or after 6 April 1951


• women born on or after 6 April 1953


What you may get


The full new State Pension is £155.65 per week. The amount you get can be higher or lower depending on your National Insurance record and how transitional arrangements for those with entitlement built up under the old and new State Pensions will apply to you. 


It will only be higher if you have over a certain amount of Additional State Pension National Insurance Contributions or credits before 6 April 2016 which count towards your new State Pension. More information on how the new State Pension will be calculated is available at: www.gov.uk/new-state-pension/how-its-calculated.


Entitlement is calculated on what the individual would have got under the old rules and the new rules. The higher figure (the “starting amount”) is paid. If it’s more than the new full state pension the difference becomes a “protected payment” (increasing each year in line with inflation). But if it is less, individuals may have to rely on adding years to get closer to the full amount (each qualifying year after 5 April 2016 adds about £4.44 a week to the pension).


You may get less than the full new State Pension if you were contracted out (see page 80) before 6 April 2016. The new pension will rise in line with average earnings, the CPI measure of inflation or 2.5%, as the state pension currently does. You can get a State Pension Statement that can tell you how much new State Pension you may get at: www.gov.uk/check-state-pension


Deferring the new State Pension


There will be new rules for deferring or postponing a claim for the new State Pension. You will be able to defer for at least nine weeks. Your state pension will increase by 1% for every nine weeks you put off claiming. This works out at just under 5.8% for every full year you put off claiming.


Qualifying for the new State Pension


You usually need to have paid National Insurance contributions for at least 10 years to qualify for any new State Pension (compared to the one year you needed to qualify for the basic State Pension). You need to build up 35 years’ National Insurance contributions before you qualify for the full new State Pension (it was 30 years to qualify for the basic State Pension). 


You still build up state pension-qualifying years even if you take time out from working to raise a family (this wasn’t previously the case). Pension eligibility is on an individual basis which means married women without enough qualifying years will no longer receive a proportion of their husband’s entitlement when he dies.


Concerns


The TUC says that although the introduction of a single-tier state pension is not a bad thing in itself, the government has not introduced it in a way that sufficiently protects current workers. It predicts that many private sector workers will be worse off. And the National Pensioners’ Convention (NPC) reported that at least five million existing pensioners, mainly women, have been left out.


According to a briefing by the general union Unite, the biggest losers are those people who have full NI contribution records and who have been contracted-in for long periods. They would, in many cases, have got a much higher benefit than the new State Pension will deliver.


The largest gainers will tend to be those groups who would not have acquired any or much State Second Pension. These include the self-employed and those with low earnings/broken careers (many of whom are women now approaching retirement).


In addition, the National Pensioners Convention (NPC) points to figures from the Department for Work and Pensions suggesting that only 22% of women and 50% of men who reach SPA in 2016-17 will get the new State Pension in full. It also reports that there has been considerable evidence to show that six out of 10 people retiring in the first five years of the new scheme will actually get less than £155.65 a week. It says that some financial analysts say that this is likely to be the case for at least 20 years. And it says that referring to it as single-tier or universal is therefore factually incorrect. 


The NPC reported that anyone born after 1970 will get less than they would have done under the previous system. 


“Most of those retiring in the first few years of the new State Pension will not get anywhere near £155 a week — so to call it a single-tier is completely wrong. In effect, the pensioners of tomorrow will have to work longer, pay more and get less than their predecessors. What we’re left with is a two-tier state pension system that no-one understands, fails to tackle the problem of pensioner poverty and is fundamentally unfair,” said NPC chair Dot Gibson.


The NPC continues to campaign for a Living State Pension for all, equivalent to 70% of the Living Wage (outside London) at just over £200 a week. In February 2016, the pensions consultants Hymans Robertson published research showing that 20 million people will lose out from the introduction of the new flat rate pension and that low-paid private sector workers earning less than around £15,000 will lose out the most. The research shows that the changes will hit more people than would have been hit by the tax credit changes Chancellor George Osborne backed down over, and that the government will save £8 billion.