State pensions

Key information
about state pensions

The new pension measures, which come into force in 2016, represent the most significant change in the UK's pensions system for many years.

  • They introduce a single-tier, flat-rate state pension, which will replace the basic and additional pensions for people reaching state pension age from 6 April 2016 onwards
  • They increase the state pension age from 65 to 66 between April 2018 and April 2020 and from 66 to 67 between April 2026 and April 2028 and make provision for five-yearly reviews of the state pension age.

The changes aim to simplify the current pension system, and remove all means-tested calculations.

The government's new plans set out a universal payment of £148.40 a week for all those who reach their state pension age and have 35 years of National Insurance contributions.

Learn more about state pensions by downloading our detailed guide.

State pension changes explained

In 2016, the new state pension will bring in some important changes you should be aware of:

  • A single pension will replace the current system with its basic and additional pensions
  • The level will be announced in autumn 2015. It will be more than the standard amount of pension credit guarantee, so at least £148.40 a week – although it does depend on your individual circumstances
  • You'll need at least 35 years of National Insurance contributions or credits to qualify for the full single-tier state pension
  • You'll need at least 10 years of contributions to get any state pension. People with between 10 and 34 years of contributions will get a proportion of the full pension
  • There will be no more 'contracting out'. This will only affect people in defined benefit occupational schemes though, because it has already ended in defined contribution schemes. Members who were formerly contracted out will begin to accrue the new state pension, but the full amount of the state pension will be reduced to take account of the period you were contracted out
  • It will be an individual entitlement. So generally speaking, there will be no specific rules for people who are married or in civil partnerships, bereaved or divorced
  • Pension credit and other means-tested benefits will still provide a safety net. However, the savings credit element of pension credit will be abolished

Deferring state pensions

Deferring your state pension means putting off your claim for a period of time. It could be as little as five weeks, or it could be several years. By deciding not to take it straight away, you can enjoy attractive financial benefits.

If you do decide to defer, you have two options:

  • Get a higher weekly state pension for life later on
  • Take the amount you deferred as a taxable lump sum with interest and then get a normal state pension

You'll earn an extra increment to your state pension for every five weeks you defer your claim. If you want to take the lump sum option, you need to defer for at least 12 consecutive months.

You may also be able to defer taking the benefits from any retirement savings plans you may have. You can find out more in Leave it for now and decide later.

To learn more about state pensions download our detailed guide here.

Download guide

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