The state pension is changing. From April 2016 a new flat-rate state pension will be introduced to replace the current system. The new state pension should be easier to understand and mean that people are less reliant on other state benefits in retirement. Here we look at what the new state pension will mean for you.

Already getting your state pension

If you’ve already reached your state pension age and are receiving your state pension, the new rules will not affect you. You’ll continue to get your state pension and any other state benefits under the current system.

 

Reaching state pension age between now and 6 April 2016

Similarly, if you’re due to reach state pension age before 6 April 2016, your state pension and benefits will be calculated and paid under the current system. This means you’ll get your basic state pension and any additional state pension (known as S2P and previously known as SERPS) you’re entitled to.

 

Reaching state pension age from 6 April 2016 onwards

You cannot make yourself eligible for the new pension by deferring your state pension.

From 6 April 2016, anyone who reaches state pension age (men born on or after 6 April 1951 and women born on or after 6 April 1953) and who is entitled to a state pension, will get the new state pension. This is expected to be worth no less than £151.25 a week although the exact amount has yet to be decided. As this will be significantly more than the current full basic state pension of £113.10 a week (rising to £115.95 in 2015/16), most people will not be eligible for further means-tested benefits such as Pension Credit.

The change should mean a much simpler system. You'll build up entitlement to the state pension based simply on how many years of National Insurance contributions (NICs) or credits you have.

 

Qualifying for the new state pension

To qualify for the new state pension you’ll need a minimum of 10 years’ worth of NICs or credits. To get the full state pension you’ll need 35 years of NICs or credits (currently you need 30 years’ worth), if you have less you’ll get a reduced state pension.

 

Deferring your state pension

You’ll no longer be able to get a lump sum for deferring your state pension. Instead you'll only be able to choose a weekly increase to your pension. You'll get an increase of 1% for every nine weeks you defer - that works out at just under 5.8% for a full year (currently the rate is 10.4%). So if you defer taking your state pension you’ll not be so well off under the new system as you are under the current one.

 

Other changes

  • The state pension age will increase in stages and will reach 67 for men and women between 2026 and 2028. Further increases after that will be based on life expectancy figures.

  • You’ll only be able to build up a state pension in your own right, so you won't be able to claim your spouse or civil partner’s contributions at retirement if they’ve died or you’re divorced. However, if you’re widowed you may be able to inherit some of your partner’s additional state pension. And there are transitional arrangements for women who paid the reduced married woman’s NICs.

This article was provided by Royal London - Reader’s Digest Over 50s Life Cover partner. If you would like to receive a free, no obligation quote for Royal London’s Defaqto 5 Star Rated Over 50s Life Cover simply call 0800 022 4994 and quote PTN026 or visit www.royallondon.com/readersdigest

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