Pensions - Articles - Single-Tier State Pension - Implications

 The Government’s long awaited paper on state pension reform has attracted much press attention. While the Government’s desire for simplification is to be applauded, such widespread reform will not be straightforward to achieve. There are clearly implications for all workers in the UK, however, in this article we focus on the considerations for sponsoring employers and trustees of occupational pension plans. 

 Background

 In brief, the Government proposes to abolish the state second pension (which is an earnings related top up to the basic state pension). The state pension will become a single tier for those who become pensioners from the date of introduction, which will be April 2017 at the earliest. Individuals with sufficient National Insurance contributions (or credits) will receive approximately £144 per week, an amount which is designed to lift the majority of pensioners above means tested support, and sits comfortably with the Government’s desire to encourage lower earners to save for retirement. Safeguards will be put in place to protect entitlements already built up by individuals at the date of the change.

 As trailed in the Budget 2012 and earlier consultations, the Government has confirmed the increase in state pension age to 67 from 2028 and a more structured approach for considering future changes. It is proposing that the state pension age will be reviewed every five years to take account of movements in life expectancy projections. 

 To view the report click here