Friday, 16 May 2014

A Fairer, Simpler Pensions System

State Pension reforms which will simplify the system and provide greater clarity to people about what they receive in retirement, have moved a step forward.

Reforms outlined in the Pensions Act, which was yesterday given Royal Assent, will create a simple, flat rate pension, the full level of which will be set above the basic means test, currently £148.35.

These reforms will particularly benefit women, carers and some low earners who have previously not received much by way of additional benefit.

It is expected that in the first 10 years after implementation around 650,000 women will benefit from the single-tier valuation of their pension at 2016, receiving on average, £8 per week more in State Pension.

The reforms are expected to help millions of people to secure a more comfortable retirement.

For the first time, self-employed people who under the current arrangement, miss out on any additional pension, will be brought fully into the State Pension scheme.

Liberal Democrat Minister for Pensions, Steve Webb said:

"The new State Pension will replace the current complex mix of basic and additional state pension which successive governments have tinkered with so much over the decades.

"It will give people clarity and confidence about what income they will get from the state in their retirement. In addition the State Pension reforms will benefit those who have historically done poorly under the current two-tier system.

"I want to see us build a fairer society within a stronger economy. That means ensuring people have a simple, better State Pension in retirement which protects them from poverty and provides a solid foundation for them to save for their future."

Under the reforms, ten qualifying years of National Insurance contributions will be required to receive any pension and for people who start their National Insurance record after the reforms are introduced, the full level of the new State Pension will be based on 35 years of contributions.

Transitional arrangements have been designed to protect people's contributions made before 2016, provided they meet the minimum qualifying period.

Thanks to Liberal Democrats in government, the coalition has introduced the triple lock guarantee to ensure the value of basic State Pension will rise by highest of inflation, earnings of 2.5% for the duration of this Parliament. The State Pension is now a higher share of national average earnings than at any time in more than 20 years.

Under the reforms, ten qualifying years of National Insurance contributions will be required to receive any pension and for people who start their National Insurance record after the reforms are introduced, the full level of the new State Pension will be based on 35 years of contributions.

Transitional arrangements have been designed to protect people's contributions made before 2016, provided they meet the minimum qualifying period.

Thanks to Liberal Democrats in government, the coalition has introduced the triple lock guarantee to ensure the value of basic State Pension will rise by highest of inflation, earnings of 2.5% for the duration of this Parliament. The State Pension is now a higher share of national average earnings than at any time in more than 20 years.