The new State Pension has arrived, but what does it mean for you?

April 7, 2016 conduentblogs

Men born after 6 April 1951 and women born after 6 April 1953 are affected by the new single-tier State Pension which comes into effect for anyone who retires from 6 April 2016. Those who have already reached State Pension age are unaffected by the change. The new flat rate pension is £155.65 per week but let’s be clear, this is an aspirational target which not everyone will reach.

To qualify for any payment under the new State Pension, you need to have 10 years of national insurance contributions (NICs), whereas before there was no minimum. Age UK suggests some 70,000 people will no longer qualify for any State Pension as a result. To get the full State Pension, you now also have to have 35 years of NICs, up from the previous 30 year requirement. However, even if you have 35 years NICs you may still not qualify for the full £155.65 per week. That’s because if you were in contracted-out employment for any period of time you and your employer paid reduced NICs and a deduction will be applied to your State Pension to reflect this.

Millions of public sector workers, such as teachers and nurses, will have been in contracted-out employment, and the employer paying reduced NICs was of course the government, who surely will be gaining by applying a deduction to the State Pension of those teachers and nurses because in part they, the government as the employer, paid less NICs!

The government has said the new State Pension is designed to be easier to understand, which may be marginally the case, although it still seems fairly complicated to me. It has also suggested it’s paid at a flat-rate, which is not the way I would describe it, with the government’s own figures suggesting only 45% of pensioners will get the full amount of the new State Pension in the first 5 years.

The moral of the story may be to ensure you put away enough money to not have to rely on the State Pension at retirement, and if you do get anything close to £155 per week from the government, that is an extra.

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