15 May 2012
Following the Queen's Speech on 9 May where the Queen set out
the government's proposals with respect to the pensions
environment, we have has a number of people emailing and ringing to
ask how this will affect them. There follows a short summary
of some of the key pension issues discussed.
State pensions
Advent of flat rate state pensions
The Queen's Speech outlined plans for legislation that will
overhaul the state pension system for new pensioners. The
current state pension is £107.45 a week for those with a
complete National Insurance record, and can be topped up to
£137.35 with pension credit. This may be replaced by a
new £140 flat rate.
The flat-rate pension might only be available for new pensioners
reaching state pension age on or after the date the new system is
brought it, rather than the millions of existing pensioners.
This could create a two-tier system of state pension.
Increase in state pension age
The state pension age will rise to 66 for both men and women by
2020. The Queen's Speech outlined plans to increase the state
pension age further to 67 between 2026 and 2028 - affecting those
aged 52 or younger now.
The speech also signalled government plans for this state
pension age to continue to rise automatically in line with
longevity. This could be done either through a formula linking
pension age to average life expectancy, or through a regular
official review.
Public sector pensions
The Queen's Speech confirmed the government's intention to
proceed with the controversial reform of public sector
pensions. Measures include:
- Moving public sector pensions over to a career average
scheme
- Increasing the age at which members can draw their
pensions.
The government says this will make public sector pensions
sustainable, with costs shared 'more fairly' between employers,
workers and taxpayers.
