State Pension Reform: what you should know now

Posted by William on October 23rd, 2009 in Pension Advice

Hi everyone,

since 1995 significant changes have been instituted regarding State Pensions. These were followed by changes brought in by the Pensions Acts of 2007 and 2008. The Act of 2008, whilst mainly focusing on Private Pensions, did also introduce changes to the State Pension as well.

The Government wishes to build on this earlier work along the following principles…

To try and make the State Pension fairer and more widely available

To simplify the State Pension simpler while making it more generous, ensuring it’s a solid vehicle that people can use to save with.

By introducing automatic enrollment into workplace pensions and the creation of personal accounts the Government hope to make saving for retirement much easier. Their hope is that those who don’t have access to occupational schemes actually start saving towards the day when they will retire - and won’t bury their heads in the sand instead.

The final principle is to “support and encourage extended working lives”… yep, it looks as though many, many people will have no choice but to work long into their old age.

Here are the key elements of the current pension reform package that you need to be aware of…

1. The State Pension age (SPa) for women is increasing from 60 to 65. This will be the same as for men. (This change comes into effect from 2010).
2. From 2024 the SPa for men and women will gradually increase from 65 to 68.
3. The number of qualifying years required to get a full basic State Pension is being reduced
4. The current minimum National Insurance contribution conditions required to obtain a basic State Pension will be removed.
5. New weekly credits for parents and carers will be introduced.
6. Adult Dependency Increases (ADIs) will be abolished.
7. New rules will allow husbands and civil partners (as well as wives) will be able to get a State Pension based on a spouse’s or civil partner’s National Insurance contribution.

There are important changes to age thresholds and qualifying ages for other Pensioner and Working Age benefits. They cover…

– Up-rating the basic State Pension in line with earnings.

– Increasing the number of people eligible for State Second Pension (S2P), which will also become flat-rated in the future.

– Allowing certain customers to buy additional voluntary National Insurance contributions.

There we are then, that’s a snapshot of what’s coming to us all very shortly. I’ll be doing more on these State Pension Reforms over these next few weeks, so stay tuned and please… start saving for a rainy day, and then hopefully, when you do retire, it’ll all be sunshine and ease for you.

Until next time, take good care.