05 April 2011
The Pensions Minister, Steve Webb has announced reform of the
state pension system. A new Green Paper 'A state pension for the
21st Century' sets out two different options for
simplifying the state pension for future pensioners.
The first option involves retaining the two components of the
state pension - the basic state pension and the second state
pension - but moving the second state pension onto a flat rate by
2020. A flat rate pension is one which is based on an individual's
contribution record and not linked to their earnings. The second
state pension is currently due to move on to this system from the
2030s.
The second option would replace the two components with one flat
rate pension of around £140 a week. This is more than the
current guarantee element of the means tested Pension Credit.
If implemented, the new state pension would be payable to
anybody reaching state pension age on or after the date the change
becomes law. Anybody who had already reached state pension age
before that date, whether or not they had actually claimed their
pension, would not be affected.
The new state pension would continue to be based on an
individual's National Insurance contribution record. The full
pension would be payable after 30 qualifying years of National
Insurance contributions. There would be a minimum level of 7 years
of National Insurance contributions to qualify.
The Government has made a commitment to honour any pension
entitlement already built up under the state pension scheme, if it
is more than the new state pension.
The public consultation ends on 24 June. A White Paper would be
issued later this year if the Government decides to proceed with
any reforms.
The Green Paper also sets out two ways for linking future rises
in the state pension age to increases in life expectancy. The first
is to use a formula to automatically link increases in life
expectancy to increases in state pension age. The second is to
introduce a system of regular reviews to consider the latest life
expectancy projections.
To view the Green Paper click here
We will publish more information once it becomes known.
