State Pension Reform
October 14th, 2015
In response to an increasing number of reports as to how misunderstood the rules surrounding the new Single-tier State Pension are and the number of people who have found they will not actually receive a State Pension of around £153 from next April; Pensions Minister Baroness Altmann has unveiled the new communications drive ahead of the introduction of the new State Pension in April next year (2016).
Under the tagline ‘Our state pension is changing’, the campaign aims to broaden the public’s understanding of how the new State Pension will work and crucially, how people can find out how it affects them, based on their own National Insurance record.
Like the system it replaces, the new State Pension will be contributory in nature with the weekly payment people receive dependent on the number and type of National Insurance contributions they have made.
Minister for Pensions, Baroness Altmann, said:
Huge efforts have been put into reforming the mind-blowingly complicated State Pension system that exists today into something that, over time, will be clearer and fairer for everybody.
But the job of explaining to people how the reforms will affect them hasn’t been done well enough.
People need to understand, so they can make the right decisions about saving and preparing for later life. One of my first actions on becoming Pensions Minister was to identify this priority, and I’m very pleased to now be launching this major campaign.
In particular, the new advertisements target people within 10 years of reaching State Pension age, a group which also has access to new freedoms to spend private pension savings flexibly. Many of these people may want to base decisions about whether or not to draw down their private pension savings on their likely State Pension amount.
Anyone aged 55 or over can apply for a personalised state pension statement that will give them an estimate of what they will get under the new system. This will be based on their work history and National Insurance contributions to date. The statements have recently been updated to include information on the contracted out deduction that may have been made.
The statements also give additional information about how people may be able to improve their State Pension before they reach State Pension age.
As well as giving everybody a clearer picture of their likely retirement income, and providing a firm basis upon which people can plan their own private or workplace pension saving, the new State Pension is also designed to tackle the inequalities of the old system.
In particular, women, carers and some lower earners who haven’t previously received much by way of additional pension will benefit. And self-employed people, who miss out on additional pension under the current arrangements, will be brought fully into the State Pension system, helping millions to enjoy a secure retirement.
In the first 10 years after implementation, around 650,000 women are expected to benefit from the starting amount calculation, receiving on average £8 a week more in State Pension.
All advisers should be aware that it is possible for any individual who is over age 55 can get a forecast their StSP entitlement if they contact the DWP.