More details of the long awaited flat rate State Pension will be announced later today.
Following a long period of consultation it is expected that the government will announce the flat rate State Pension will start from April 2017. It is anticipated that the new flat rate State Pension will be set at £144 per week; although this figure will be adjusted to take account of inflation between now and 2017.
The flat rate State Pension will replace the current system of means tested top up payments, which many pensioners do not claim. At present all pensioners can apply for pension credits to top up their income to a minimum of £142.70 per week. However, millions of pensioners do not claim the pension credits, causing financial hardship for many; something which it is hoped the flat rate State Pension will address in the future.
Flat rate State Pension changes
The changes will see the most radical overhaul to the State Pension system in years, however it is expected that it will only affect pensioners retiring after 6th April 2017; anyone retiring before that date will continue under the old system.
As part of the changes it is expected the government will announce that anyone who has not paid National Insurance contributions for at least 10 years will not qualify for the flat rate State Pension.
It is also expected that there will be changes to the amount of National Insurance paid by members of Final Salary pensions.
State Second Pension
It is as yet unclear how the government intends to phase out the State Second Pension, previously known as the State Earnings Related Pension Scheme (SERPS), which acts as a top up to the basic State Pension.
Under the current system some people will be entitled to a higher income, when the basic State Pension and State Second Pension is combined, than they will get under the new flat rate State Pension.
The government has already said that it will recognise ‘accrued rights’ and it will be interesting to see how they address this issue.
