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Queen’s Speech

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.

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