Government announces single-tier state pension
The Government has published a white paper outlining some proposed changes to the state pension.
The paper, 'The single-tier pension: a simple foundation for saving' sets out details of the new state pension, which will be single-tier. This means there will be one state pension in place of the current different tiers of state pension that apply now.
The single-tier pension will be set above the basic level of means-tested support (the pension credit guarantee, currently £142.70 per week for a single pensioner). This will be £144 per week in today's money.
It will replace the additional state pension and other additions to it, such as the age addition.
The savings credit element of pension credit will be abolished for pensioners reaching state pension age after the changes are introduced.
The guaranteed element of pension credit will remain as a last resort for those who need it.
You will need to pay or be credited with 35 qualifying years of national insurance contributions to receive the full amount.
You will need to pay or be credited with national insurance contributions for between seven and ten years to receive any state pension.
The single-tier pension will be based on your own national insurance contribution record.
The Government will continue to allow people to defer claiming their state pension and receive a higher weekly state pension in return. The higher pension amount will be finalised closer to the introduction of the changes.
Our understanding is that if you defer starting your state pension until after the changes take place, you will lose the option to take the higher pension amount as a lump sum payment. However, we are still examining the detail on this point.
If you have a national insurance contribution record before the changes take effect, extra arrangements will be put in place to protect you.
It is important to note that at the moment, these changes are only proposals which have been put forward for consultation. If they are brought into force, this will not happen until the next Parliament at the earliest. We understand the earliest date is likely to be April 2017.
We are still examining the changes in detail and will place more information on our news service over the next few days.