State Pension Changes
Summer 2010
It’s never too early to plan your pension, and there are important changes to the state pension that you should be aware of.
Raising the retirement age
Before 6 April 2010, the state pension age (SPA) – the age at which you are legally entitled to start drawing your state pension – was 65 for men and 60 for women. However, between 6 April 2010 and 2020 the women’s state pension age is rising gradually to 65. If you are a woman born before 6 April 1950, there is no change. If you were born between 6 April 1950 and 5 April 1955, your SPA will be between 60 and 65. If you were born after 5 April 1955, your SPA is 65 or possibly higher.
Under current legislation, both men’s and women’s SPA will be gradually increased to 68 between 2024 and 2046. However, the Conservative manifesto proposed bringing forward the first of these dates.
Contributions record and index-linking
To be entitled to the full state pension, from 6 April 2010 you need to have paid the appropriate national insurance contributions (NICs) for 30 years (previously about 39). If you have missing years, you can backdate voluntary Class 3 contributions for up to six years.
If you have stopped work to look after children or someone disabled, and did not keep up your Class 3 NICs, help is at hand. From 6 April this year, mothers caring at home for children aged under 12 and full-time carers for the disabled will receive full NIC credits for their years off work. Up to 22 years’ worth of credits for past responsibilities may also be available.
The new government has stated its intention to restore the earnings link for the basic state pension from April 2011, including a ‘triple guarantee’ as proposed by the Liberal Democrats to match the rise to the higher of earnings, prices or 2.5%.
The State Second Pension
The State Second Pension (S2P – formerly SERPS) applies only to those in employment, who are ‘not contracted out’, and is
additional to the state pension. At present, there is a complex link between past earnings and the level of S2P entitlement. A new flat rate, currently set at about £1.50 a week per year of entitlement, will be introduced gradually between 2012 and 2030.
The election
As with all advice at the moment, these proposed rules may change following the post-election changes in government.
