Tax & Accounting News

All change on state pensions

12/05/2010

The state pension has been with us for over 100 years, with the first payments made on 1 January 1909 – but this April saw some of the biggest changes since the system was introduced, primarily aimed at those who reach retirement age on or after 6 April 2010.

These changes included a reduction in the number of qualifying years required to receive a full basic state pension, changes to the state pension age and new National Insurance (NI) contribution credits.

Previously, state pensions could be claimed from age 65 for men and 60 for women and for those who were already in receipt of a pension when the changes were brought in, that will not change. However, for women born on or after 6 April 1950, their state pension age will gradually increase between now and 2020, until it also reaches 65. For those born on or after 6 April 1959, the state pension age for men and women will then increase further, until it reaches 68 years of age by 2046.

April also saw a reduction in the number of 'qualifying years' required to claim a full Basic State Pension, with both men and women now only needing to work and pay NI contributions for 30 years in order to receive the full amount. This is designed to help those who have taken time off to care for children or other relatives, while parents or carers will also be able to build up additional pension entitlement through new 'contribution credits'.

It will also be possible to combine contributions from earnings with credited contributions to build up entitlement to the State Second Pension (formerly known as the State Earnings-Related Pension or SERPS).

Even for individuals with substantial private pensions or savings, it is still important to consider the state pension when calculating retirement income, and it is a good idea to obtain a state pension forecast periodically.

For more advice or information, please contact us.